Today the federal court cleared a $15bn merger between Vodafone Australia and TPG, declaring that it would "not substantially lessen competition" and putting no conditions in place.
The Australian Competition and Consumer Commission (ACCC) opposed the merger last year because it considered that, in the absence of the merger, TPG was likely to continue to roll out its own mobile network, becoming an innovative and competitive force in Australia’s concentrated mobile telecommunications market, which includes 5G networks.
TPG unable to build 5G network
At the point of the ACC’s opposition, TPG had already spent $1.26 billion on the spectrum needed to build a mobile network. However in January 2019 TPG founder, David Teoh, said increased costs and the government banning Huawei from supplying to Australian companies building 5G networks, made it now unviable.
“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,” ACCC Chair, Rod Sims said.
Federal court verdict
Despite the ACCC being successful in more than 80 per cent of the consumer and competition law cases it brings, today it was not, with federal court justice, John Middleton, saying the merger would not “substantially lessen competition” in the market.
Middleton said it was “extremely unlikely and there is no real chance that TPG will roll out a retail mobile network or become an effective competitive fourth mobile network operator in Australia in the relevant future.”
5G network competition
The federal court justice also noted that Vodafone has strong competitors in Telstra and Optus. Telstra and Optus both have fixed and mobile network services and both have already rolled out 5G networks in selected areas. He said the “rational and business-like solution” is for Vodafone and TPG to merge.
Speaking after the decision had been made, Sims said Australian customers have “lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services.”
Merger set to complete this year
Subject to approvals from other regulators and shareholders, and possibly an appeal from the ACCC, Vodafone and TPG have said the merger is set to be complete by mid-2020.