Australia’s Federal Court has declared a proposed merger between TPG Telecom (ASX: TPM) and Vodafone Hutchison Australia (ASX: HTA) would not substantially lessen competition.
The Australian Competition and Consumer Commission (ACCC) opposed the merger last year because it considered that, in the absence of the merger, TPG was likely to continue to roll out its own mobile network and become an innovative and disruptive competitor in Australia’s concentrated mobile telecommunications market.
TPG had already spent $1.26 billion on the spectrum needed to build a mobile network, has an extensive transmission network, as well as a large customer base, and well-established brands in TPG, iiNet and Internode.
The ACCC also believes TPG has the ability and incentive to overcome technical and commercial challenges.
“Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed,” ACCC Chair Rod Sims said.
“Mobile telecommunication services are integral to Australia’s social and economic future and Telstra, Optus and Vodafone already control almost 90 per cent of the market. There is clear evidence that consumers pay more when markets are concentrated.”
“The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent “rational” pricing.”
The ACCC is successful in more than 80 per cent of the consumer and competition law cases it brings. It opposes mergers in a range of markets every year, with very few such decisions challenged in court.
“We will continue to oppose mergers that we believe will substantially lessen competition, because it’s our job to protect competition and, in doing so, ensure that Australian consumers enjoy the benefits of competition,” Mr Sims said.
“We stand by our decision to oppose this merger. If the ACCC won 100% of the cases we took it would be a sign we weren’t doing our job properly; by only picking ‘safe’ cases and not standing up for what we believe in.”
“The future without a merger is uncertain. But we know that competition is lost when main incumbents acquire innovative new competitors.”
The ACCC says it is carefully considering the judgment.