Vodafone Hutchison Australia and TPG Telecom to Merge

RMSotheby’s  Simon Clay

Vodafone Hutchison Australia has agreed a deal to merge with broadband provider TPG Telecom to create a telecommunications company to take on Telstra and Optus.

The deal was thrashed out following years of domination for Telstra in Australia's mobile communications market though times have proved tougher more recently.

The companies announced the "proposed merger of equals", with Vodafone owning 50.1% of the company and TPG owning the remaining 49.9%.

TPG is Australia's second largest internet service provider with more than 1.9 million subscribers, while Vodafone is the third largest mobile operator with 6 million subscribers.

The $9.99 plan, which iTWire covered in an article "TPG to offer "free unlimited mobile data plan", which was free for the first six months and then $9.99 per month thereafter, is now not certain to proceed.

TPG now wholesales Vodafone's 4G network under a AU$1 billion deal that also involved TPG building out a 4,000-kilometre fibre network for Vodafone to launch a fixed-line National Broadband Network (NBN) offering.

TPG and VHA have entered into a scheme implementation deed, with the proposal having the unanimous backing of TPG's board.

Australia's telco market will be getting smaller after TPG and Vodafone announced a AU$15 billion merger Thursday morning. The combined group, to be listed on the local stock exchange and called TPG Telecom Ltd., will have annual revenue of more than A$6 billion. The merged company will be a more powerful challenger to Telstra and Optus in Australia, with an integrated fixed and mobile offering. Vodafone will provide a guarantee on AUD 2.4 billion of this debt, lower than the AUD 3.3 billion guarantee that Vodafone now provides for VHA's debt.

"The merger with VHA represents an exciting step-change in TPG's evolution, and will benefit both our shareholders and Australian consumers alike", Teoh said in a statement.

The review will look at competitive impacts in mobile services, where TPG now has a growing presence, and also fixed line, where Vodafone is a discounter.

TPG and Vodafone said they will form a joint venture that will put in a bid for a slice of Australia's 5G wireless spectrum during an upcoming government auction.

Berroeta is expected to stay on as boss of the merged group, while TPG's chief and chairman, David Teoh, is set to become chairman.

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