Today in the Federal Court of Australia, TPG and Vodafone have effectively won the right to merge after Justice John Middleton told the court that he merger would “not unduly reduce competition”.
The whole saga started back in August 2018 when TPG and Vodafone announced a $15 billion merger that would allow them to compete with the likes of Optus and Telstra in all areas of the market including 5G.
Then in May 2019 the ACCC blocked the merger of the two companies arguing that customers could end up “paying higher prices” for “less innovative” mobile and fixed broadband plans if the companies were allowed to merge. They said that the merger would further concentrate an already concentrated Australian telecoms market and that it did not satisfy the legal test of not “substantially lessening competition”.
At the time Vodafone slammed the ACCCs actions saying their reasonings of encouraging TPG to create a fourth carrier were “fantastical” and a “fallacy”, vowing to challenge the ruling.
A combination of our companies would create a new, vigorous and vibrant competitive force. Left unchallenged, this decision will only serve to further entrench the enormous power of Telstra and Optus.
Today the two companies had their day in court and have come out victorious with Justice Middleton agreeing that the merger would not reduce competition, with 254 pages of reasoning.
The courts has come to the view that the proposed merger would not have the effect, or be likely to have the effect of substantially reducing competition … the merger can proceed.
Justice Middleton found that it was extremely unlikely that TPG would roll out their own network any time soon — most likely due to the increase in costs now that Huawei is banned. He found that the merger would build a stronger competitor force against Optus and Telstra.
As you would expect the ACCC stands by their original ruling and is considering appealing continuing to play the line that the merger would concentrate the markets and as such consumers would end up paying more. they would prefer TPG build their own and believe that TPG has the ability and incentive to do so — we think they have been misled.
Vodafone Hutchison Australia CEO, Iñaki Berroeta, said that the result today is a great result for the Australian economy allowing for greater investment in next generation networks. Vodafone are planning on rolling out their 5G network in the middle of this year and expect this to be accelerated as soon as the merger proceeds. It seems that the merger will be good for us consumers, more choice and value in high quality 5G networks.
What do you think? Do you think a merger of TPG and Vodafone would be good for the industry like we do?
For broadband, I can’t see any possible implications for competition given the existence of the NBN.
For mobile, I really can’t see how Australian consumers can support a fourth parallel set of mobile infrastructure, so I’m not sure where the negative competition impacts would be there either.
Likely to be a good decision.
I think that a combined TPG/Vodafone will be in a position to be a competitive third network. This may be better than two strong carriers and two weak carriers.
The ACCC was gambling that TPG would enter the market and imo also gambling that Vodafone’s owners continued to pump in capital.