VHA makes good on court threat after ACCC blocks TPG merger

Vodafone Hutchison Australia has launched legal action in the Federal Court seeking approval to merge with TPG.

“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,” a VHA spokesperson said.

In a statement released to the ASX, TPG said it was working with VHA “to progress the proceedings” and that it supports the orders being sought by VHA. VHA is seeking orders that the proposed merger will not have the effect or likely effect of substantially lessening competition in the Australian telco sector.

VHA and TPG earlier this month foreshadowed the action after the Australian Competition and Consumer Commission (ACCC) announced its opposition to the merger, which would create a $15 billion telco combining VHA’s mobile network and TPG’s extensive fixed-line assets and customer base.

The ACCC said it believed the merger would reduce competition and contestability in the telco sector. In particular, ACCC head Rod Sims said that the merger would prevent the emergence of a fourth mobile operator in Australia.

TPG had been in the process of rolling out a new mobile network in capital cities, before dumping the plan in January. The decision to halt the rollout came after the ACCC in December expressed its concerns that a merger between TPG and VHA would be a net negative for competition in the mobile space. TPG didn’t cite the ACCC as a factor in its decision; instead it blamed the government’s ban on the use of Huawei equipment for Australian 5G networks, which TPG said would leave its mobile network with no viable upgrade path to the new wireless standard.

Announcing the ACCC’s decision, Sims said that the competition regulator believed that with a merger off the table, TPG would face a commercial imperative to resume rolling out a mobile network.

“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,” Sims said.

“Wherever possible, market structures should be settled by the competitive process, not by a merger which results in a market structure that would be subject to little challenge in the future. This is particularly the case in concentrated sectors, such as mobile services in Australia.”

“TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor to the benefit of consumers,” the ACCC head said. “TPG is likely to be a vigorous and innovative supplier of mobile services in Australia, offering cheaper mobile plans with large data allowances, and competing strongly against incumbents Telstra, Optus and Vodafone.”

The action by VHA lists the ACCC and TPG as respondents. In its ASX statement, TPG said that the two parties were listed as respondents for “process reasons”.