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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.

TPG is, has been and the ACCC makes it plain can continue to be, a reseller of time on the Vodafone network. But TPG had bigger plans: it invested heavily in the development of a new mobile service. There was great fanfare: the new fourth mobile network would offer, amongst other things, unlimited data plans for less than the incumbent systems and it would focus on 5G allowing it to leapfrog existing technologies and go straight to the next big thing. The primary mover in the next big thing market, and owners of a significant slug of the intellectual property in the devices that underpin it, is China's Huawei. When the Australian government followed the US government into criticisms of Huawei, on security grounds, and banned the use in network transport of their devices, TPG's investment was, essentially, lost. The company decided that it was simply not cost effective to start again and abandoned its own mobile project.

On the other hand, Vodafone are late and light to the NBN party. Putting the two together would produce, the companies say, a composite multi-faceted telecom company. Kinda like those old national telcos, before they were broken up into land-line and mobile networks but shhhh. we won't say anything about that.

The ACCC's case seems to rest on the fact that Vodafone has "felt the need to enter the market for fixed broadband services" and "Given the longer term industry trends, TPG has a commercial imperative to roll out its own mobile network giving it the flexibility to deliver both fixed and mobile services at competitive prices. It has previously stated this and invested accordingly."

The response of the markets was immediate and brutal: TPG's shares fell more than 13% - which translates to about AUD1) and VHA watched its relatively small issue fall by more than 28%, in part due to the error of ACCC in releasing market sensitive information during trading hours then issuing a press release saying what it had done and confirming its decision to oppose the deal.

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