Published: Sat, September 01, 2018
Hi-Tech | By Wayne Curry

Australia's $11 bln telco deal dials up high hopes

Australia's $11 bln telco deal dials up high hopes

Vodafone Hutchison Australia and TPG Telecom have made a decision to combine their businesses as part of Vodafone's converged communications strategy to take on rivals Telstra and Optus in Australia.

Earlier, Australia blocked China based telecom equipment maker Huawei from supplying 5G telecom equipment citing security issues.

The two companies will join forces in a "merger of equals" to create an operator with an enterprise value of around A$15 billion ($10.9 billion), that will be better placed to compete with market leaders Telstra and Optus.

Under the deal, TPG shareholders will own 49.9% of the group, with Vodafone Australia shareholders will have 50.1%.

TPG shares closed at $9.31, up more than 18% on the day and over 60% in the past month, though yesterday's close is well short of the $12.84 hit in July 2016 before a profit downgrade hit confidence in the stock because of the imminent impact of the NBN's rollout. Alongside its solid position in the broadband space, TPG has also been registering interest for a launch into the mobile space, though what this now means for plans remains to be seen.

Australia's telco market will be getting smaller after TPG and Vodafone announced a AU$15 billion merger Thursday morning.

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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". David Teoh, who is now the CEO and chairman of TPG, will become the new group's chairman.

Now trading at 169.08p, down 2.23 per cent as of BST 11.12, Vodafone PLC (LON:VOD), like many other companies on the Index, is struggling to gain momentum as GBP strength soars.

"Together TPG and VHA 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".

"The merger with VHA represents an exciting step-change in TPG's evolution, and will benefit both our shareholders and Australian consumers alike", Teoh said in a statement.

We will soon commence a public review of the proposed merger between TPG and Vodafone Hutchison Australia. The Board of MergeCo will comprise: David Teoh, as Chairman (currently CEO and Chairman of TPG), Iñaki Berroeta as Managing Director and CEO (current CEO of VHA), existing TPG directors Robert Millner and Shane Teoh, two nominees of Vodafone, two nominees of HTAL, and two new independent directors.

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