Vodafone and TPG announce merge, forming new AU$15 billion company

RMSotheby’s  Simon Clay

The company said it "assures customers they will continue to enjoy Vodafone's world-class mobile network, Vodafone nbn, and its value-packed plans and products following the announcement of a proposed merger with TPG".

THE Australian mobile market is about to get a huge new player.

Iñaki Berroeta, the chief executive of Vodafone Australia, said the biggest winners from the deal would be consumers because the combined entity would be able to give the market leaders Telstra and Optus a run for their money.

Vodafone Hutchison will have a 50.1% stake in the new group and shareholders of TPG, which is unrelated to the eponymous private equity firm, will own the rest.

There have been whispers of a merger between Vodafone Hutchison Australia (VHA) and TPG in the wind over the last few days, but those rumours have now been confirmed.

At 0200 AEST on Thursday, Hutchison shares had jumped 48 percent taking them to 0.18 Australian dollars (0.13 US dollars) per share, while TPG bounced 15.04 percent to 9.06 Australian dollars (6.60 USA dollars) per share.

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Shares in TPG, which had announced plans to build its own wireless network, soared in Sydney on a union with an existing network with 6 million customers.

The merger will also bulk up Vodafone's 156 MHz of mobile spectrum with TPG's little-used 40 MHz slice, bringing it close to Telstra's 217 MHz (Optus is far out in front of the mobile market in spectrum holdings with 334 MHz).

The consolidation, unanimously recommended by TPG's board, comes amid intensifying competition in Australia's telecommunications industry. David Teoh, now the CEO and chairman of TPG, will become the chairman.

TPG shareholders would own 49.9 percent of the entity which will be called TPG Telecom Limited and listed on the Australian Securities Exchange with a combined revenue of more than Aus$6 billion. Vodafone will provide a guarantee on approximately A$2.4bn of this debt, lower than the approximately A$3.3 billion guarantee that Vodafone now provides for VHA's debt.

"The combination of our two highly complementary businesses and talented employees will create a more sustainable company, with enhanced capacity to invest in new technology and innovation", he added.

Mr Berroeta will be the managing director and chief executive of the new group.

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