ACCC opposes TPG and Vodafone merger

ACCC opposes TPG and Vodafone merger

ACCC accidentally leaks information prematurely

ACCC chairperson Rod Sims

ACCC chairperson Rod Sims

Credit: ACCC

The Australian Competition and Consumer Commission (ACCC) has decided to oppose to the proposed $15 billion merger between TPG Telecom and Vodafone Hutchison Australia (VHA).

The information was inadvertently published online on the ACCC’s mergers register briefly on 8 May, with the ACCC later clarifying the reasons for the decision.

Ultimately, ACCC chair Rod Sims said that if the proposed merger does not proceed there is a real chance TPG will roll out a mobile network.

As previously reported, TPG decided to stop the roll out of its mobile network in Australia due to factors "outside of TPG's control", in January. The publicly-listed telecommunications provider said at the time that the decision was a result of the Government blocking Huawei from providing 5G equipment in Australia.

TPG explained at the time that its mobile network plans, which at the time amounted to $100 million in costs, were based on small cell architecture and that the principal equipment vendor selected was Huawei.

“TPG has the capability and commercial incentive to resolve the technical and commercial challenges it is facing, as it already has in other markets," Sims said. "TPG already has mobile spectrum, an extensive fibre transmission network which is essential for a mobile network, a large customer base and well-established telecommunications brands.

“TPG is also facing reducing margins in fixed home broadband due to the NBN roll out. Further, there is the growing take-up of mobile broadband services in place of fixed home broadband services which is expected to increase especially after the rollout of 5G technology.”

Since the information slipped, shares for both companies slumped on 8 May with TPG falling 13.8 per cent while VHA tanked 37.5 per cent on the ASX, at the time of writing.

In December, ACCC revealed a preliminary review of the proposed merger, with Sims saying competition in the market would lessen as a result.

“Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor,” Sims said.

“We therefore have preliminary concerns that removing TPG as a new independent competitor with its own network, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition.

"If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.”

Sims added that a mobile market with three major players rather than four was likely to lead to higher prices and less innovative plans for mobile customers,

The merger, which was first announced in August 2018, was expected to be completed in the first half of 2019, with a decision pending from the Federal Court, approval from TPG shareholders and other regulatory processes.

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