Vodafone-TPG merger given the green light by Australian Federal Court

In the latest twist on the rollercoaster that is the AU$15 billion TPG-Vodafone merger, the Australian Federal Court has today allowed the two telecom companies to merge.

Rumours of the merger were first confirmed back in August 2018, with both companies announcing their intention to more effectively compete with Telstra and Optus – the two telcos that have dominated the telecommunications market thus far and continue to do so.

Almost a year later, the ACCC blocked the merger, positing that the market was already too concentrated for both mobile and broadband services and that it would prefer TPG to enter the mobile market as its own entity to provide further competition.

TPG and Vodafone then took the ACCC to court, claiming that their merger would not substantially lessen competition, and now the companies have had the hearing ruled in their favour.

Anti-competitive?

The ACCC stands by its initial assessment of the merger, with Chair Rod Sims saying that “Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed”.

As it stands, almost 90% of the mobile market is taken by Telstra, Optus, and Vodafone, and similarly in the broadband sphere with Telstra, Optus and TPG.

Sims continued: “We will continue to oppose mergers that we believe will substantially lessen competition, because it’s our job to protect competition and, in doing so, ensure that Australian consumers enjoy the benefits of competition.”

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Consumer effects

At this stage it’s unclear what direct impact this merger will have on consumers, but if the ACCC is to be believed, a more concentrated market would lead to higher costs for consumers for both mobile and broadband plans.

Naturally, Vodafone and TPG claim much the opposite is true, with the former company stating that the merger will allow for a greater investment in new technology such as 5G.

“For the first time, Australia will have a third, fully-integrated telecommunications company”, Chief Executive Officer Iñaki Berroeta said. “This will give us the scale to compete head-to-head across the whole telecoms market which will drive more competition, investment and innovation, delivering more choice and value for Australian consumers and businesses.”

The merger is on track to be completed by mid-2020, unless further appeals are made by the ACCC.

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