Vodafone Australia and TPG Telecom get hitched

Vodafone TPG cellcos in love
Image credit: Thomas Soellner / Shutterstock.com

Vodafone Australia and TPG Telecom have struck a merger deal that will result in a stronger third operator valued at A$15 billion ($12 billion).

Following confirmation last week that the two operators were in “exploratory talks” over a potential merger, the all-share deal was confirmed Thursday in a filing to the Australian Securities Exchange [PDF].

Under the agreement, the resulting telco will be listed as TPG Telecom Limited, although Vodafone Australia will technically be the majority shareholder at 50.1%, and the new firm will continue to use the Vodafone brand as well as TPG’s brands for iiNet and Internode.

TPG chief David Teoh will be the chair of the new company, while current Vodafone Australia CEO Inaki Berroeta will be managing director and CEO.

The deal comes just as TPG Telecom – which operates as an MVNO on Vodafone’s network – was set to launch its own full-fledged mobile network later this year as Australia’s fourth cellco later this year.

However, Teoh said the Vodafone merger made more sense because challenging the market dominance of incumbent Telstra and Singtel-backed Optus required a stronger third player equipped with both fixed broadband and mobile networks, reports the Australian Associated Press:

“This merger will create size, scale and financial strength for us to compete with incumbents and that will bring tremendous benefit to the Australia consumer,” Mr Teoh told analysts on Thursday. […]

Mr Berroeta said the market ultimately needed “strong players” to take on Telstra and Optus, adding that competition wasn’t necessarily about “many small players”.

The combined subscriber base of the new company amounts to nearly 8 million – 6 million from Vodafone and the rest from TPG.

As part of the deal, TPG said it will separate its Singapore mobile business to its existing shareholders by way of a non-cash distribution deal (which TPG says it had always planned on doing sooner or later), and is in discussions with the IMDA on how to make that happen.

The merger is set to be finalized next year, provided it survives regulatory review from the Foreign Investment Review Board and the Australian Competition and Consumer Commission (ACCC).

Meanwhile, TPG and Vodafone also announced in the ASX filing that they have also signed a separate JV agreement to acquire 3.6-GHz 5G spectrum from the government auction scheduled for late November.

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