TPG Telecom in talks to merge with Vodafone Australia

22 August 2018 | Alan Burkitt-Gray

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TPG Telecom, the Australian company that owns AAPT and Pipe Networks and is planning a mobile network in Singapore, is negotiating a merger with Vodafone Hutchison Australia (VHA).

If the talks come to fruition the combined company will become Australia’s third biggest operator, behind Telstra and Singtel’s Optus.

VHA – a 50-50 joint venture between Vodafone group and CK Hutchison of Hong Kong – has 5.98 million mobile customers, it announced at the end of July.

TPG Telecom announced in May that it planned to launch a 4G data-only mobile service in Australia, having spent around A$1.7 billion on network and spectrum. It also owns the fourth network in Singapore and in 2015 bought Australian ISP iiNet

Australian telecoms analyst Paul Budde this morning suggested TPG will drop plans for that new Australian network if the merger goes ahead. “While I would have loved to see TPG entering the mobile market to bring some good competition to it, in the end business sense has prevailed and Vodafone and TPG have decided to look at merging both companies,” he said.

Iñaki Berroeta, CEO of VHA, which trades in Australia simply as Vodafone, and TPG’s CEO, David Teoh, said the combined company would be worth A$5.84 billion ($4.3 billion).

Budde commented: “The market has long been dominated by egos and that has made it sometimes difficult to make rational business decisions, [but] in this situation it is indeed a very rational decision.” He pointed out that “Vodafone has never been able to close the mobile market share gap with Telstra and Optus”.

VHA was formed in 2009 when Hutchison – which operated in Australia with the Three brand – merged with Vodafone’s Australian business. The Three brand was dropped two years later and the old Three network was closed in 2013. However CK Hutchison has remained a 50% shareholder in the Australian business, though Vodafone is seen as holding the management role. Berroeta has been a Vodafone person for 14 years, having started with Vodafone Spain in the Basque country.

Budde added: “This merger is going to save them lots of money, something the share market already likes.”