Vodafone Australia and TPG Telecom have confirmed they will merge into a single, $15 billion telecommunications firm to challenge mobile giants Telstra and Optus.
The companies expect the merger to be complete next year, subject to approval from regulators including the Foreign Investment Review Board and competition watchdog, they said in an announcement to the Australian Stock Exchange on Thursday.
Under the “merger of equals”, TPG shareholders would own 49.9 per cent of the newly merged group – called TPG Telecom Limited – with Vodafone Australia shareholders owning 50.1 per cent.
TPG’s chief executive, David Teoh, would be the non-executive chairman of the merged group, while Vodafone boss Inaki Berroeta would assume the position of CEO and managing director.
Mr Berroeta said the merged group would become a stronger competitor to bigger rivals Telstra and Optus.
“The combination of the two companies will create an organisation with the necessary scale, breadth and financial strength for the future,” Mr Berroeta said in a statement.
“The equal terms of the combination preserves the competitive strengths of the two businesses, meaning a sustainable long-term fixed/mobile competitor to Telstra and Optus.”
The big winners of the merger would be Australian consumers, he added.
The directors of the TPG board have unanimously recommended the company’s shareholders vote in favour of the deal in the absence of a superior proposal, the telco said in a statement.
The board of the merged entity would include directors from both companies.
Vodafone, jointly owned by its British parent company Vodafone Group Plc and Hutchison Telecommunications, is Australia’s third-largest telco player by subscriber numbers, after Telstra and Optus.
Fourth-ranked TPG, which also trades under the brands iiNet and Internode, is in the midst of building a $1.9 billion, fourth mobile network for Australia.
Veteran telecommunications analyst Paul Budde told The New Daily last week a merger between TPG and Vodafone was a rational business decision – a “win-win” for both.
But he suggested it might lead TPG to step back from its competitive price offerings so it did not cannibalise Vodafone’s customer base.
“The big fear in the market was that TPG would start a real price war in the market. This will become now less likely,” he said.