ACCC rejects TPG-Vodafone's $15 billion merger

The ACCC has knocked back the proposed merger between TPG and Vodafone.

The watchdog was scheduled to announce its ruling on Thursday, but inadvertently published the decision on its mergers register today.

The two telcos announced their intention to merge in August 2018, under a plan that would have created a $15 billion entity and created a combined company capable of more comfortably competing with market leaders Telstra and Optus.

Update: The ACCC has published a full media release about the decision, saying it considered the merger would reduce competition and contestability in the mobile and fixed broadband markets.

“Given the longer term industry trends, TPG has a commercial imperative to roll out its own mobile network giving it the flexibility to deliver both fixed and mobile services at competitive prices. It has previously stated this and invested accordingly,” said Sims.

“Vodafone has likewise felt the need to enter the market for fixed broadband services. These moves by TPG and Vodafone are likely to improve competition and future market contestability.”

Sims added that TPG was the best prospect for giving Australia a new mobile network operator, increasing competition. This despite TPG scrapping its plans to build its own mobile network in January after the government banned using 5G equipment from Huawei. 

“TPG has the capability and commercial incentive to resolve the technical and commercial challenges it is facing, as it already has in other markets. TPG already has mobile spectrum, an extensive fibre transmission network which is essential for a mobile network, a large customer base and well-established telecommunications brands,” said Sims.

“TPG is also facing reducing margins in fixed home broadband due to the NBN rollout. Further, there is the growing take-up of mobile broadband services in place of fixed home broadband services which is expected to increase especially after the rollout of 5G technology.”

TPG had poured hundreds of millions of dollars into building its own network before pulling the pin, which was designed around Huawei's small cell technology.

Vodafone chief executive Iñaki Berroeta has already announced the two telcos will launch legal action in the Federal Court.

“VHA respects the ACCC process, but we believe the merger with TPG will bring very real benefits to consumers.  We have therefore decided that VHA should, together with TPG, pursue approval of the merger through the Federal Court," said Berroeta.

“While we continue to pursue the merger through the court, it remains business as usual for VHA. We will continue to challenge the market by delivering the best value products and services we can to our customers.”

As a result, the merger agreement has been extended to 31 August 2020 to allow time for the case to proceed through the court.