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Aussie competition regulator opposes the formation of a super-telco

Editorial Staff

The Australian Consumer and Competition Commission (ACCC) has issued a notice opposing a "merger" proposal involving TPG Telecom Limited (TPG) and Vodafone Hutchison Australia Pty Ltd (Vodafone). The reasons include that TPG has been "disruptive" in a complacent market and is "the best prospect Australia has for a new mobile network operator to enter the market." But it's a far more complex picture than that.

The proposal is for a with Vodafone Hutchison Australia Pty Ltd (Vodafone), a company whose ASX tag gives a clear indication of its history: HTA. The telecoms industry has long been a hotbed of both innovation and takeovers. The "merger" was not a merger: it was a proposal under which "Vodafone and Hutchison Telecommunications (Australia) Limited (“HTAL”) will each own an economic interest of 25.05% in MergeCo, with TPG shareholders owning the remaining 49.9%. The Board of MergeCo will comprise: David Teoh, as Chairman (currently CEO and Chairman of TPG), Iñaki Berroeta as Managing Director and CEO (current CEO of VHA), existing TPG directors Robert Millner and Shane Teoh, two nominees of Vodafone, two nominees of HTAL, and two new independent directors. MergeCo will be listed on the Australian Securities Exchange (ASX) and called TPG Telecom Limited."

On any logical assessment, then, what was proposed was not a merger: VHA would own less than 25% of the new company. Vodafone's announcement of the plan did not spell out what was actually happening: it was all "forward-looking statements," as such things are often termed. Burrowing under the froth, it seems that the proposal was that both VHA and TGP would transfer the entirety of their operations to the new company, in lawyer-speak known as "MergeCo." The implication is that the assets of both companies would be worth broadly the same and that that would be reflected by equal share ownership of MergCo. But those shares would not, combined, outweigh the shares that showed the true nature of the deal.


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