TPG and Vodafone to file legal action in response to ACCC’s decision

TPG Telecom and Vodafone Hutchinson Australia (VHA) plan to file legal action in the Federal Court following the Australian Competition and Consumer Commission (ACCC) decision to oppose to the proposed merger of the two telcos.

The telcos will file a case on the basis that the potential merger will not substantially lessen competition on the supply of mobile services, one of ACCC's reasons to opposing to the merger.

According to the ACCC, the merger would reduce competition and "contestability" in the broadband services sector. 

Vodafone's parent company, Hutchinson Telecommunications Australia, which is publicly-listed on the ASX, said VHA and TPG have agreed to extend the term of the Scheme documents to 31 August 2020 to allow sufficient time for the Federal Court process to conclude and for the merger process to be completed. This represents a 12 month extension from the initially proposed date of the first half of 2019.

VHA CEO Iñaki Berroeta said the company remains "firmly committed" to the merger.

“VHA respects the ACCC process, but we believe the merger with TPG will bring very real benefits to consumers. We have therefore decided that VHA should, together with TPG, pursue approval of the merger through the Federal Court," Berroeta said.

“VHA is an established mobile business with less than one per cent of the fixed broadband market, while TPG is the second largest fixed broadband player with no mobile network.

“The merger provides a unique opportunity for VHA and TPG to combine their complementary assets. The merger would create an entity that can compete more aggressively in this highly competitive market than either VHA or TPG could on their own. It is disappointing that the ACCC does not see it this way."

Meanwhile, TPG said the news was disappointing as it has "committed significant resources to working constructively with the ACCC in relation to the application for informal clearance".

“While we respect the ACCC’s process, its decision has significant implications for Australian consumers, and in our view, must be challenged," TPG executive chairman David Teoh said.

“TPG remains of the firm belief that the proposed merger will result in greatly enhanced competitive dynamics in the Australian telecommunications industry, as well as superior choice and outcomes for consumers."

On 8 May, the ACCC decided to oppose to the proposed merger between TPG and VHA. Ultimately, ACCC chair Rod Sims said that if the proposed merger does not proceed there is a real chance TPG will roll out a mobile network.

"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,” ACCC's Sims said.

“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.”

“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,” he added.

As previously reported, TPG decided to stop the roll out of its mobile network in Australia saying the decision was a result of the Government blocking Huawei from providing 5G equipment in Australia.

TPG explained at the time that its mobile network plans, which at the time amounted to $100 million in costs, were based on small cell architecture and that the principal equipment vendor selected was Huawei.