Telco trial ends with speculation rather than fireworks

TPG executive chairman David Teoh leaves the Federal Court in Melbourne. Picture: David Geraghty.

The legal tussle between telcos TPG Telecom and Vodafone Hutchison Australia and the competition regulator didn’t quite ­deliver the promised fireworks on Tuesday but the closing submissions leave the fate of the $15bn merger delicately balanced.

Neither side has been able to land a decisive blow over the course of the three-week hearing, which has at the very least shed light on the inner workings of ­reclusive billionaire David Teoh. What makes Teoh tick just might end up being the critical consideration for Justice John Middleton as he mulls over the evidence in the coming months.

TPG and Vodafone are adamant that there’s no chance of TPG going solo on mobile, while the Australian Competition & Consumer Commission contends that Teoh will figure out a way to make the numbers work in his favour, with or without Huawei.

The regulator’s argument is based on the evidence presented during the trial, which paints a picture of a cavalier Teoh throwing ideas around, shooting from the hip and willing to do whatever it takes to achieve his goal.

Teoh’s track record so far does bear that out, although he may have overreached with his mobile plans, pouring more than a billion dollars into spectrum that’s losing value by the minute, and failing to fully consider the implications of pinning its faith on Huawei’s equipment.

Teoh told the court during the course of the trial that the window of opportunity for mobile, open a year or so ago, is now firmly closed. It was a good idea at a time, when the likes of Telstra and Optus weren’t driving down prices and doling out more data for less.

Faced with changed market conditions, not to mention a more expensive and arduous path to a 5G upgrade, is TPG better off copping a loss on the 4G spectrum?

The ACCC says that’s a prospect a businessman like Teoh ­simply won’t accept, so there will be a mobile network of some sort at some point, and it will aim to shake things up.

It’s a fair enough argument but the problem with the ACCC’s ­assertions is that they are all speculative, which is something that worked against the regulator when it tried to block Australia’s largest grocery wholesaler, Metcash, from buying the Franklins supermarket chain in 2010.

In that case the Federal Court didn’t buy the ACCC’s argument that blocking the merger would deliver a better outcome for independent grocers and that there was a chance that a third party could come and pick up all or a significant part of Franklins.

Justice Middleton will to some extent weigh up a similar argument: does a combined TPG-­Vodafone deliver a better deal to consumers or will, as the ACCC submits, a stand-alone network by TPG be the tonic for greater competition in the market?

The regulator had promised a host of compelling evidence as it blocked the merger in May this year. However, the three-week trial has failed to deliver a smoking gun, one that could conclusively tip the decision in ACCC’s favour.

All parties now face a long wait, potentially as long as next February, and while the ACCC has ­plenty on its plate to keep itself busy, TPG and Vodafone face an agonising wait, caught in a merger limbo.