UPDATE - Vodafone: Channel integration a long way off in Hutchison merger

UPDATE - Vodafone: Channel integration a long way off in Hutchison merger

Companies mum on technical and channel integration pending regulatory approval

Telco analyst, Telsyte, issued a statement claiming the combined entity would be “relatively strong in the consumer segment with an estimated 25 per cent market share, while remaining a small player in the business segment with an estimated 15 per cent share”.

Telsyte sees the merger as good for the two companies and the industry, but doubted its capabilities to lead to more competitive offerings for Australian mobile users. The analyst firm also predicted a lack of integration between Vodafone and Hutchison’s existing joint venture networks with Optus and Telstra, which could pose a challenge to the companies’ operations and the synergy of the merger.

Cannon said Telsyte’s analysis was a fair call, as Vodafone and 3 are the most competitive players in the market so their merging will ease pressure on Telstra and Optus.

“But at the same time the market cannot sustain four profitable players, long term. So you’re better off having the merger of those bottom two players to make it a profitable business so that consumers will still be able to continue to have that alternative option,” he said, adding that Vodafone and 3 have a proven history of competitive pricing and product innovation.

Ovum analyst Nathan Burnley agreed, stating the coming together of Australia’s third and fourth placed mobile operators will “create a player with enough scale to sustainably compete in the Australian market”.

He predicted the combined entity would serve more than 6 million customers, with revenues of about $4 billion, or 27 per cent of the mobile market, and offer more points of presence with a combined distribution network.

IDC’s Cannon said the merger came as no real surprise, as consolidation in the telco market had been expected for the past couple of years.

“I think they have done the right thing, and in the right manner as well,” he said.

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