TPG, Vodafone Australia to merge in bid to compete against Telstra, Optus

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TPG, Vodafone Australia to merge in bid to compete against Telstra, Optus

TPG and Vodafone Australia have agreed to merge and create a $15 billion competitor to market leaders Telstra and Optus.

The “merger of equals” will create a company with more than 27,000km of fibre networks and 5000 sites, at least 8 million subscribers across Australia. The combined group will be renamed TPG Telecom Limited.

TPG chairman and chief executive David Teoh will be chairman of the merged group, while Vodafone boss Iñaki Berroeta will be chief executive and managing director.

“The merger with Vodafone represents an exciting step-change in TPG’s evolution, and will benefit both our shareholders and Australian consumers alike,” Teoh said.

“Together TPG and Vodafone will have a comprehensive portfolio of fixed and mobile products, and will own the infrastructure required to deliver faster services and more competitive value propositions to Australian customers. With this merger, we will be a more formidable competitor against Telstra and Optus.”

As part of the agreement, TPG’s Singapore operations will be separated and will enter into a commercial and transitional services arrangement with the merged company in relation to certain services upon completion.

TPG and Vodafone also signed a separate joint venture to acquire, hold and licence 3.6 GHz spectrum, as the Australian government looks to auction 125 MHz of 3.6 GHz band spectrum sometime in late November 2018.

“The Australian telecommunications market is characterised by the presence of Telstra and Optus. Together, TPG and Vodafone will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile,” Berroeta said.

“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. We are confident that this merger will be highly beneficial to customers, shareholders and other stakeholders.”

The merger is expected to complete sometime next year, with TPG shareholders owning 49.9 percent of the merged group and Vodafone shareholders owning the remaining 50.1 percent.

The two companies confirmed rumours of merger discussions last week, with reports of both enlisting UBS and Macquarie Capital as advisors.

For the first half of 2018, Vodafone posted a $92.3 million loss despite a boost in revenue to $1.77 billion and a 5.2 percent bump in subscribers to 5.98 million in the six months leading to 30 June 2018.

TPG said its 2018 financial year results will be released on 18 September, with preliminary revenues of $2.5 billion and EBITDA of $840 million.

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