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Vodafone Australia and TPG agree A$15bn merger to take on Optus and Telstra

Vodafone said the merged company will be a more capable challenger to Telstra and Optus and will be much better placed to invest in mobile and fixed line services
Vodafone
Vodafone expects the deal to cut costs and lift revenues

Vodafone Group PLC's (LON:VOD) Australian business and local rival TPG Telecom Limited have agreed to merge into a single A$15bn telecommunications company in a bid to strengthen their position in a competitive market. 

The combination of Vodafone Hutchison Australia Pty Limited (VHA) – Australia’s third largest mobile operator – and TPG will have about 20% of the nation’s mobile phone market and 22% of the fixed-line market.  

TPG is Australia’s second largest fixed-line operator with a residential subscriber base of 1.9mln.

“The combined listed company will be a more capable challenger to Telstra and Optus, and will be much better placed to invest in next generation mobile and fixed line services to benefit Australian consumers and businesses,” Vodafone’s chief executive designate Nick Read said.

READ: Vodafone shares drop as it posts slowdown in first quarter organic service revenue

Vodafone will own a 50.10% stake in the merged company, with TPG owning the remaining shares.

TPG chairman and chief executive David Teoh will become chairman of MergeCo and VHA boss Iñaki Berroeta will be managing director and chief executive of the company.

The merged company will be listed on the Australian Securities Exchange and be called TPG Telecom Limited.

Merged company to deliver cost and revenue synergies

Vodafone said the merger is expected to generate “substantial cost synergies” from the combination of two complementary networks and boost revenues through the cross-selling of products across the companies’ corporate and consumer customers.

The enterprise value of the merged group will be about US$15bn, with revenue of more than US$6bn and earnings (EBITDA) of $1.8bn. Net debt will be about US$4bn.

The merger is expected to be completed in 2019, subject to approval from TPG shareholders and regulatory authorities.

TPG and VHA sign joint venture

Separately, TPG and VHA signed a separate joint venture for a licence for the 3.6 GHz spectrum. The government is auctioning 125 MHz of 3.6 GHz band spectrum in late November.



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