TPG, Vodafone to create telco superpower in $15 billion merger

If you thought Telstra was a giant, get a load of the two telcos trying to slay it.

Following speculation, Vodafone Australia and TPG Telecom have announced their plans to merge into a single telecommunications firm in a deal reportedly worth $15 billion.

TPG and Vodafone confirmed to the Australian Stock Exchange (ASX) on Thursday (August 30) that they plan an ‘all-scrip’ merger of equals, with the deal shored up in 2019.

Vodafone shareholders will hold 50.1 per cent of the merged company, while TPG shareholders will take the remaining 49.9 per cent.

The company is reported to still be called TPG Telecom, but with a 10-year licence to continue to use the Vodafone brand on products.

Speaking to the Australian Financial Review, Vodafone boss Inaki Borroeta said he will be chief executive and managing director, while TPG boss David Teoh will be chairman.

“The Australian telecommunications market is characterised by the presence of Telstra and Optus. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile,” Mr Berroeta said.

Mr Teoh said that TPG’s values will shine through in the merger.

“The characteristics that have made TPG what it is today – innovative, customer-focused, bold – will be magnified through this combination of such highly complementary businesses. Together we will become a more effective industry challenger that strives to create competitively-priced consumer products with the high levels of customer service that differentiates us in the market,” he said.

The deal is subject to approval from regulators including the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC).

As a potential roadblock to the deal, the two parties will have to work out how to tackle Vodafone’s large debt, reportedly consisting of loans from its parent companies worth more than $8 billion.

It is reported that both parent companies will absorb around $2 billion in debt each to ensure the new entity performs strongly.

The news comes after it was rumoured that Optus had re-engaged with Amaysim – Australia’s fourth largest phone provider – over a potential merger.

However, sources at Amaysim say that the claims are unsubstantiated and that Optus has not been in contact with Amaysim. Amaysim is currently an Optus network reseller.

What does the TPG, Vodafone merger mean for Aussie consumers?

TPG is in the midst of releasing its own 4G mobile network. The merger with Vodafone would likely mean that the two networks are combined to better compete with those of Optus and Telstra.

On its own network, TPG was set to offer unlimited data phone plans for just $9.99 a month, but with no voice service and full-speed data caps at 1GB per day.

TPG’s network was designed to service major capital cities only, and the merger with Vodafone would mean its network is farther-reaching.

With Vodafone reported to still white label the new potential products, users could expect similar value that they see with the carrier today.

Vodafone-Hutchison Australia Chief Commercial Officer Ben McIntosh said customers will be no worse off.

“We’re very excited about the future, but for the moment, nothing changes for our customers. They can continue to enjoy all the things they love about us including $5 Roaming, no lock-in handset contracts, 35-day prepaid expiry, and NBN Instant Connect and 4G Backup,” Mr McIntosh said.

Vodafone was a pioneer in the unlimited mobile data movement earlier in 2018, with ‘unlimited’ plans starting at $60 a month.

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