TPG begins legal fightback against ACCC over Vodafone merger ruling

TPG has followed through on its legal fightback against the ACCC, seeking orders in the Federal Court.

On May 8 the ACCC ruled against the proposed merger between the two telcos.

TPG Telecom and Vodafone Hutchison Australia have followed through on their legal fightback against competition regulators, seeking orders in the federal court that their proposed $51 billion merger would not hurt competition in the telecoms sector.

Both telcos had flagged court action earlier this month after the Australian Competition and Consumer Commission rejected the proposed merger, saying that the move would remove competition from market.

“The parties will seek orders for expedition of the proceedings,” TPG said in a statement to the ASX issued after trading closed on Friday afternoon.

On May 8 the ACCC ruled against the proposed merger between the two telcos, saying it was likely to prevent TPG entering as fourth player in the mobile networks market and therefore cut competition in the sector.

“TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services,” ACCC chair Rod Sims said in a statement at the time.

But TPG has argued that Australia's move to effectively ban Chinese telecoms supplier Huawei from participating in the building of the nation’s 5G networks means it will have to shelve any ambition to become a mobile services supplier.

TPG told the market on Friday that proceedings had been lodged with the Federal Court of Australia seeking orders that the proposed merger will not have the effect, or likely effect, of substantially lessening competition.

“For legal process reasons, the Statement of Claim identifies VHA as the applicant and the Australian Competition and Consumer Commission and TPG as the respondents,” the telco said.

“TPG and VHA are working together to progress the proceedings and TPG supports the orders being sought in the VHA application.”

Both telcos are looking to get things moving as quickly as possible, especially as Telstra and Optus look to intensify their 5G rollouts.

Vodafone in under pressure to provide more details on its 5G plans and TPG needs to show the market it has a plan in place to make a return on the mobile spectrum it has in its possession.

The ACCC has come under pressure from investors and analysts for rejecting the deal, with industry watchers saying that the telcos stand a good chance of overturning the regulator’s decision.

Both TPG and Vodafone argue that combining their respective network assets will create a third operator powerful enough to compete against Telstra.

Vodafone on Friday said that the merger will also open the doors to further investment in mobile networks and better prices for consumers.

“We believe the merger will create an entity that can compete more aggressively in the mobile market and will increase our ability to invest in networks, new technologies, and competitive plans and products for Australian consumers,” the telco said.

That argument, however, failed to convince the ACCC and the regulator is sticking to its guns, with the regulator’s chairman Rod Sims convinced that TPG Telecom will enter the market as the fourth mobile operator.

TPG maintains that it can’t build a mobile network on its own, especially without the help of Huawei’s cheaper 5G equipment. However, a loss in the federal court could force it to re-enter the mobile market.

Having spent $1.3 billion on 700MHz spectrum in 2017, TPG will have to either sell the spectrum cheaply or spend an extra $60 million to $80 million to restart the mobile rollout.

It will also further limit the overall footprint of its network, from 80 per cent to 60 per cent, and focus on the major metros.

Industry sources have told The Australian that the ACCC’s decision is largely predicated on the belief that faced with the two scenarios, TPG will opt to build a network.

As for Vodafone, its 5G plans have also been hurt by the banning of Huawei’s 5G kit and the telco is understood to be working to release details on its 5G equipment vendor shortly.