Vodafone Australia and TPG announce $15bn merger

Joshua Bennett
September 1, 2018

Australia's TPG Telecom Ltd has agreed to a merger with Vodafone Group's Australian business for a single $15bn telecommunications company to take on bigger rivals Telstra Corp Ltd and Optus.

Bootnote: Readers outside Australia should take note that TPG Telecommunications is not related to the United States private equity company of the same name.

"The combination of these assets will maximise the opportunities presented by convergence and best position the combined company to invest in 5G technologies that will deliver faster services and offer more competitive value propositions to more Australian customers", the statement said.

The company will continue to be listed as TPG Telecom Ltd on the Australian stock exchange, but Vodafone will own 50.1 percent of the new entity, with TPG taking the remaining 49.9 percent.

Vodafone (LON:VOD) has today announced plans that itself and its partner company, Vodafone Hutchison Australia will merge with TPG Telecom.

It would also consists of more than 6 million mobile subscribers and 1.9 million fixed line broadband customers, however there are now no plans to change either of the existing brands. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile.

Their merger is bad news for market leader Telstra, one of Australia's largest employers which earlier this month warned of "enormous challenges" ahead after posting an 8.9 percent slump in annual profit. David Teoh, now the CEO and chairman of TPG, will become the 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.

Mr Berroeta is expected to stay on as CEO of the merged group, while TPG CEO and chairman David Teoh will become chairman. The board of the merged entity will include David Teoh as chairman (currently CEO and Chairman of TPG), Inaki 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.

The Australian Competition and Consumer Commission has said it will be commencing a public review of the proposed merger to identify any competition concerns.

In parallel to the merger agreement, TPG and VHA have signed a separate joint venture agreement in order to participate together in the upcoming spectrum auction and manage their spectrum licences.

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