The ACCC has blocked the Vodafone Hutchinson and TPG merger with the watchdog claiming the merger will “reduce competition and contestability” in this sector.
It stated the proposed merger would preclude TPG entering as the fourth mobile network operator in Australia.
Rod Sims, chairman at the ACCC said, “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.
“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. 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.”
Australia already has a concentrated mobile services market, with the three network operators, Telstra, Optus and Vodafone, having over 87 per cent share. Similarly, the fixed broadband market is concentrated, with Telstra, TPG and Optus having approximately 85 per cent share.
Sims said broadband services are of critical importance to Australian consumers and businesses, across both fixed and mobile channels.
“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.”
“Vodafone has likewise felt the need to enter the market for fixed broadband services. These moves by TPG and Vodafone are likely to improve competition and future market contestability.”
Industry incumbents have also referred to TPG as a formidable potential competitor in mobile and market commentary has supported the view that prices would fall with TPG’s entry as a new mobile network operator, delivering substantial benefits to consumers.
At the news of the ACCC’s decision TPG’s share price plummeted 15 per cent and Hutchinson Telecommunications’ stock price dropped 37 per cent.
The consumer watchdog raised concerns about the $15 billion deal late last year arguing it could reduce the amount of competition in the industry.
If the deal went through, Vodafone shareholders would own 50.1 per cent of the company with TPG owning 49.9 per cent.
The newly merged entity would’ve been named TPG Telecom.