$15B Vodafone-TPG Merger Cleared By Federal Court

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The Federal Court has cleared the way for Vodafone and TPG to merge into a $15 billion telco.

The planned merger was first announced in August 2018, when the two companies proposed a “merger of equals” to take on the likes of Telstra and Optus in the Australian telco market.

But the plans soon hit a snag, with the ACCC sensationally blocking the proposed merger in May 2019, citing TPG’s importance as a “new mobile network” in strengthening competition in the Australian market.

Vodafone immediately announced it would take the ACCC’s decision to the Federal Court.

In a ruling handed down on Thursday, Justice John Middleton found the merger was in the local market’s best interest.

“To leave Vodafone and TPG in its current state would not promote competition in the market,” he said. “It is not for the ACCC or this court to engineer a competitive outcome.”

While the ACCC originally argued the merger would block any chance of TPG becoming Australia’s fourth mobile network operator, however, Justice Middleton argued: “TPG’s ship has sailed in the retail mobile market in Australia”.

The court found more players in the market did not necessarily mean equal competition.

accc responds

The ACCC has since responded to the court’s decision to allow the merger, with chairman Rod Sims maintaining his stance.

“We stand by our decision to oppose this merger. If the ACCC won 100 per cent of the cases we took it would be a sign we weren’t doing our job properly; by only picking ‘safe’ cases and not standing up for what we believe in,” he said.

“The future without a merger is uncertain. But we know that competition is lost when main incumbents acquire innovative new competitors.”

Sims pointed to Optus and Telstra’s current market dominance as his key concern.

“Mobile telecommunication services are integral to Australia’s social and economic future and Telstra, Optus and Vodafone already control almost 90 per cent of the market. There is clear evidence that consumers pay more when markets are concentrated,” Sims said.

“The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent “rational” pricing.”

The ACCC said it was “carefully considering the judgment”.

 

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