ACCC raises concerns over possible TPG and Vodafone merger

Australian competition and consumer commission (ACCC) has raised concerns about the proposed merger between TPG telecom and Vodafone Hutchison Australia and its effect on telco markets.

ACCC raises concerns over TPG and Vodafone merger

The proposed joint venture between the two telco giants was announced in August this year, in a bid to take on bigger rivals Telstra Corp Ltd. and Optus.

The $15 billion dollar planned merger combines Australia's third- and fourth-largest Telcos into a larger third player using TPG's fibre network and Vodafone's mobile system.

ACCC Chair Rod Sims said the ACCC sees TPG Telecom Ltd as the fourth mobile network operator in Australia, and it’s likely to be an aggressive competitor.

“We therefore have preliminary concerns that removing TPG as a new independent competitor with its own network, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition.

If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.” Mr Sims said.

TPG supplies retail fixed broadband and voice services and is building its own mobile network in Australia Vodafone Group PLC owns and operates its own mobile network and has started supplying fixed broadband services on the National Broadband Network (NBN).

The competition Commission expressed concerns that the merged TPG-Vodafone would not have the motivation to operate in the same way, and as a result, there would be less competition in the market.

“A mobile market with three major players rather than four is likely to lead to higher prices and less innovative plans for mobile customers,” Mr Sims said.

The ACCC will said in a statement it will also consider the longer-term impact of the proposed merger, and consider factors of NBN and the roll out of 5G technology.

“The ACCC is continuing to consider whether operators will need to offer both mobile and fixed broadband services in the longer-term to remain competitive, meaning that TPG and Vodafone will necessarily be closer competitors in the future,” Mr Sims said.

TPG shares drop amid concerns

On Thursday, Telco stocks dragged amid the ACC’s concerns.

Telstra Corp Ltd. shares have fallen 0.63% on Thursday, while Telstra shares dropped 1.52% at the time of writing.

TPG Telecom Ltd shares fell 15% at time of writing.

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