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TPG share price: where next as TPG-Vodafone merger is approved?

Stock in the telco soared today, after Justice John Middleton overturned the ACCC’s decision to block the proposed TPG-Vodafone merger.

TPG share price in focus Source: Bloomberg

TPG share price soars on merger news

It’s been a busy day for Australia’s telecommunications industry.

Telstra reported its first-half results before the market opened, and the planned TPG-Vodafone merger, which was previously blocked by the ACCC, was approved in Federal Court today.

The share price response was an unsurprisingly bullish one: when TPG Telecom (ASX: TPM) left its trading halt – the stock shot up 12.93% – to $8.255 per share.

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In overturning the ACCC's decision today, Justice John Middleton argued that the merged TPG-Vodafone entity would not lessen competition in Australia’s already concentrated telecommunications industry.

Justice Middleton further added that it was not the ACCC's responsibility to ‘engineer competition,’ and that ‘leaving TPG and Vodafone in their current state would not create more competition in the market.’

‘The rational and businesslike solution is for Vodafone and TPG to merge,’ Justice Middleton concluded.

The story so far

The ACCC – Australia’s competition watchdog – had previously argued that a merged telco would stifle competition, particularly in Australia’s all-important mobile market.

According to the ACCC, this was because ‘in the absence of the merger, TPG was likely to continue to roll out its own mobile network,’ thus allowing TPG to be a more able competitor in the market.

TPG’s Founder and Executive Chairman – David Teoh – staunchly denied such claims, arguing that the rollout of his telco’s once-planned mobile network became untenable after the federal government banned the use of Huawei 5G equipment.

That is, TPG had no intention to ‘roll out its own mobile network’ as the had ACCC argued.

Many in the industry said the merger should have never been blocked by the ACCC to begin with.

TPG share price: where next?

Speaking of today’s court decision, Mr Teoh said:

‘TPG is very pleased with the Federal Court decision and looks forward to combining with VHA to create Australia's newest full integrated telecommunications operator. We will work to finalise the other conditions to the merger as soon as possible.'

For the merger to be fully finalised, a number of conditions still need to be met, including: the approvals from TPG shareholders, the Federal Court and a number of other regulatory bodies.

Beyond that, TPG Telecom is expected to release its first-half FY20 results on 5 March.

Finally, and further suggesting that all may not be said and done, the ACCC noted that they are currently ‘carefully considering the judgment.’

The ACCC has 28 days to appeal Justice Middleton’s decision.

At the $8.255 mark, TPG Telecom (ASX: TPM) currently trades ~16% higher than it did a year ago.

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