Vodafone and TPG confirm plan to merge

THE Australian mobile market is about to get a huge new player as Vodafone and TPG confirm plans to merge. Here’s what that means.

THE Australian mobile market is about to get a huge new player.

Vodafone and TPG have announced their plan to team up and take on the telco heavyweights of Telstra and Optus.

This morning the two companies — TPG and Vodafone Hutchison Australia (VHA) — said they had agreed to terms on a “merger of equals”.

TPG shareholders will get 49.9 per cent of the new group and Vodafone Hutchison shareholders will get the remaining 50.1 per cent.

Such a deal has been speculated about for some time. Now that it’s finally about to take place, consumers will be provided with a new look alternative to Telstra and Optus.

“The Merger will create a more effective challenger to Telstra and Optus, with an integrated fixed and mobile offering and a pro forma enterprise value of approximately $15 billion,” the companies said in a joint statement.

The deal is all about combining assets to take on the big guys. Vodafone has a sizeable mobile network with a mobile customer base of approximately 6 million subscribers as of June 2018.

Meanwhile TPG — which also owns iiNet and Internode — has extensive fibre networks and high density cells in metropolitan areas that will significantly boost Vodafone’s efforts to rollout 5G mobile technology.

“The combination of these assets will maximise the opportunities presented by convergence and best position the combined company to invest in 5G technologies that will deliver faster services and offer more competitive value propositions to more Australian customers,” the statement said.

The companies also stated that “there are no changes currently planned to any of the existing brands of either TPG or VHA.”

According to those who worked on the deal, the details around marketing strategies have not yet been finalised.

So at this point, it remains to be seen if they keep the Vodafone and TPG mobile brands completely separate and if TPG will continue to offer the hugely cheap mobile deals it was promising to bring to market later this year.

LESS COMPETITION AS FOUR BECOMES THREE

Prior to the announced merger, TPG was planning on building its own mobile network. But there were big question marks over whether there were enough Australian mobile customers to economically sustain a fourth mobile network.

Telecom expert Paul Budde thinks Telstra and Optus will be happy about the announced merger.

“The big fear in the market was that TPG would start a real price war in the market, this will become now less likely as in the merged situation they wouldn’t want to cannibalise the Vodafone customer bases as that would lead to an immediate decline of revenues,” he said.

“Telstra and Optus will be delighted with this as competition will now be less severe.”

The deal still needs to get regulatory approval but that shouldn’t be an issue, says Angus Kidman, tech expert from consumer comparison website finder.com.au.

“Given that we’ve long operated in a three-player market for mobile networks, it seems unlikely it will be blocked,” he told news.com.au.

As for consumer expectations, he said that over time we could see the plans offered by the two brands become quite similar.

“We saw with TPG’s iiNet buy that over time plans from all its brands became very similar,” he said.

He also speculated that we might see Vodafone’s popular 4G backup for NBN installations be extended to more consumers as TPG internet customers could benefit from Vodafone’s existing 4G network.

“It would be pleasing to see Vodafone’s 4G backup for new NBN installs extended, but that might only happen for pricier plans,” he said.

VHA Chief Commercial Officer Ben McIntosh said it’s business as usual for customers.

“We’re very excited about the future, but for the moment, nothing changes for our customers. They can continue to enjoy all the things they love about us including $5 Roaming, no lock-in handset contracts, 35-day prepaid expiry, and NBN Instant Connect and 4G Backup,” he said in a statement.

“If the merger is approved, it will create even more opportunities for us as a combined entity to drive value for Australian consumers.”

When discussions of the merger deal were confirmed last week, Mr Budde said it made business sense for both companies.

“While I would have loved to see TPG entering the mobile market to bring some good competition to it, in the end business sense has prevailed and Vodafone and TPG have decided to look at merging both companies,” he said.

“TPG faced the reality that building out a new mobile network after they acquired the spectrum for it is a very costly exercise and it was — for obvious reasons — very difficult for them to negotiate access with the other operators. So this merger is going to save them lots of money”

TPG’s chief executive, media shy billionaire David Teoh, will be the non-executive chairman of the new entity, while Vodafone boss Inaki Berroeta will take up the position of CEO and managing director of the group.