Vodafone AU-TPG merger facing rejection

This article was authored by Dylan Bushell-Embling, and was originally posted on telecomasia.net.

The proposed merger between Vodafone Australia and fixed line ISP TPG Telecom could be on rocky ground, after the nation’s competition regulator outlined a number of preliminary competition concerns about its impact on the local telecoms market.

The ACCC has published a 34-page statement of issues as part of its evaluation of the merger and its potential impact on both the mobile and broadband markets.

ACCC chair Rod Sims said the ACCC has taken the preliminary view that TPG is on track to become Australia’s fourth mobile operator, and a merger with Vodafone would therefore reduce the potential competition in the market, which would be detrimental to consumers.

“We… have preliminary concerns that removing TPG as a new independent competitor with its own network, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition,” Sims said.

“If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.”

In addition, Vodafone Australia has this month entered the retail fixed broadband market with the launch of plans over the wholesale National Broadband Network (NBN).

“Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base,” Sims said.

He said the ACCC plans to closely examine the potential impact of removing Vodafone as a competitor in the fixed broadband market, as well as the longer-term impact of the merger in light of ongoing mobile broadband substitution.

“The ACCC is continuing to consider whether operators will need to offer both mobile and fixed broadband services in the longer-term to remain competitive, meaning that TPG and Vodafone will necessarily be closer competitors in the future.”

If the ACCC does elect not to approve the merger, it could cause complications for the two operators, which recently formed a joint venture to bid for and acquire 5G spectrum in this month’s 3.6-GHz auction.

TPG has already been offering mobile services over the Vodafone Australia network under a mobile virtual network operator arrangement.

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