TPG ready to roll on 5G as ACCC admits defeat

The incoming boss of the merged TPG-Vodafone Australia has pledged to have the nation’s third-biggest telco up and running within months.

TPG-Vodafone Australia CEO Inaki Berroeta. Picture: Adam Yip

The incoming boss of the merged TPG-Vodafone Australia has pledged to have the nation’s third-biggest telco up and running within months as it prepares to switch on its ultra-fast 5G network.

Vodafone chief executive Inaki Berroeta, who will become CEO of the new $15bn company, said Australia’s 5G road map could be rewritten now that the Vodafone-TPG merger could go ahead.

His comments came as the competition regulator formally conceded defeat in its efforts to block the merger by saying it will not appeal last month’s Federal Court ruling which gave the green light for the mega-telco deal.

This decision cleared the way for the companies to “compete more fiercely in the market”, Mr Berroeta told The Australian.

The combination of broadband specialist TPG with mobile carrier Vodafone is set to create a genuine third player in the market to compete against telco giants Telstra and Optus.

ACCC boss Rod Sims told The Australian he would take time to reflect on the lessons learned from a bruising months-long court battle.

Mr Sims said on Thursday that over a period of weeks the regulator had concluded it had no grounds to appeal the merger.

“We looked carefully as to whether there had been any appealable error. The judgment is based around the facts, and the judge accepted the facts put forward by TPG and Vodafone,” Mr Sims said.

After releasing his decision last month Federal Court judge John Middleton this week released his full 300-page judgment, which included a wholesale rejection of Mr Sims’ argument that the merger would reduce competition.

In his findings Justice Middleton said it was “extremely unlikely and there is no real chance” that TPG would roll out its own retail mobile network or become an effective competitive fourth mobile network operator in Australia in the future.

Mr Sims said the ACCC would be reviewing the case to see what lessons the regulator could take from the defeat, but stood by his initial position that the merger was bad for competition.

“We’re disappointed by the outcome but given the facts that were in front of us at the time, we still think it was the right thing to oppose the merger, and we still believe a market is better with new players coming along to compete rather than incumbents buying them out and consolidating existing players.”

Mr Berroeta said he was confident the merger would be complete by the “middle of the year”, pending final approval by regulators including the Foreign Investment Review Board and a vote from TPG shareholders.

The combined entity will be known as TPG but Vodafone will retain its consumer branding, as will TPG subsidiaries iiNet and Internode.

TPG boss David Teoh, who will become chairman of the merged company, told The Australian that the ACCC’s decision not to appeal the Federal Court’s decision gave him an overwhelming feeling of relief.

“I’m happy that the judge understood the way TPG does business, and agreed with what we had been saying about the state of the telecommunication market in Australia,” he said.

“Telstra and Optus are dominant players and they need a strong third player to constrain them.

“This merger will create a strong third force.”

Shares in TPG surged almost 10 per cent on the news, closing at $8.25, while shares in Hutchinson Telecommunications Australia, the joint owner of Vodafone, soared more than 13 per cent to 17c per share.

TPG on Thursday released its interim results, which were largely in line with expectations, with the company’s underlying revenue up 1 per cent.

Earnings before interest, taxes, depreciation and amortisation of $399.1m for the six months to the end of January were down 6 per cent, however, a decline the company said was due to one-off expenses related to the Vodafone merger and Singapore start-up costs of $3.3m.

The figures were struck on revenue of $1.246bn, up from $1.235bn a year earlier.

TPG upgraded its guidance, expecting earnings for the year of between $775m and $785m, up from $735m-$750m.

It also continued to push towards 2 million broadband subscribers, reaching 1,940,000, which includes subsidiary brands iiNet and Internode.

Mr Teoh said there would be challenges with any merger, but the two businesses were largely complementary and probably would not have a lot of overlap.

“VHA (Vodafone) and TPG are good companies with good management and good people, and if you look at the infrastructure both companies have, they’re complementary,” he said. “We have strong fibre infrastructure, and VHA’s side would bring in the mobile infrastructure.

“When the two companies come together I think the balance sheet is strong, the infrastructure is strong, and we will compete with Telstra and Optus going forward.”

Vodafone on Thursday switched on its 5G network for the first time, enabling connectivity in 5G sites around Parramatta in Western Sydney.

TPG had argued to the federal court that it was relying on equipment from Chinese tech giant Hua­wei to build out a 5G network, plans that became impossible due to the Australian government’s decision to block Huawei from the build.

Mr Teoh said that TPG would provide dark fibre infrastructure, mobile spectrum holdings and 900 small cells for the combined company’s mobile network.

Foad Fadaghi, the managing director of telco consultancy Telsyte, said consumers would now have a viable alternative to Telstra and Optus, and the difference was likely to particularly be felt in the regions, where the merged entity would be able to make additional investment.

“For Vodafone customers, for example, in the future, they’ll notice the increased coverage when they’re roaming to the outskirts of the CBD areas,” he said.

Additional reporting: Chris Griffith