Australia’s telecommunications sector is witnessing a significant merger. TPG Telecom Ltd agreed to merge with Vodafone Group’s Australian business. The new entity will be able to challenge Australia’s two biggest mobile companies, Telstra Corp Ltd. and Optus.
“We do mobile, they do fixed... ultimately this combination is around synergies in the technology,” said Vodafone Hutchison Australia Chief Executive Officer Inaki Berroeta.
The new entity will be called TPG Telecom. And it will have an enterprise value of A$15 billion ($11 billion), according to the joint statement issued by the companies. Under the deal, TPG shareholders would own 49.9 percent of the entity. The remaining goes to Vodafone’s two Australian owners, Vodafone Group and Hutchison Telecommunications (Australia).
“This merger creates the size, scale, and financial strength for us to compete with the incumbents,” TPG Chief Executive Officer David Teoh told investors on a conference call. The companies also said that they would prepare a joint bid to buy 5G spectrum at a government auction in November.
Inaki Berroeta will become the Chief Executive of the merged business. David Teoh will become the Chairman.
The deal is, in fact, good news for Vodafone, given its bad track record in Australia. The company had to face flak for its network reliability issues in the country. The tie-up is a new chance for Vodafone to establish its presence in Australia.
The consolidation happens at a time when the competition heats up in the telecommunications sector. The rollout of the National Broadband Network, a government-owned broadband wholesaler, has affected internet profitability. It has also resulted in intense price competition in the mobile market.
Experts are of the opinion that the new tie-up, which has the strength of TPG’s fiber network and Vodafone’s mobile system, will be capable of taking on its arch rivals in the telco sector. The deal is subject to approvals from the Australian competition and overseas investment watchdogs.