The TPG Telecom Ltd (ASX: TPM) share price tumbled 15% to $6.60 this morning after the competition regulator the ACCC announced it has "concerns" over its proposed merger with Vodafone Hutchinson Australia.
TPG Telecom shareholders should look away now:
Source: Google Finance
The big price falls are because: "The ACCC is concerned that the proposed merger will substantially lessen competition in the market for retail mobile services nationally"
"The ACCC's preliminary view is that the proposed merger will result in a more concentrated and less competitive market by removing TPG as a strong competitor. The ACCC considers that without the merger, TPG would likely adopt an aggressive pricing strategy, offering cheap plans with large data allowances."
The ACCC's view has come as a surprise to some in the market as it's based on their assumptions as to the outlook for TPG Australia's own network mobile business that is not even in service yet, although TPG does act as a reseller or mobile virtual network operator (MVNO).
Below is the ACCC's own chart on the mobile share of the big operators in Australia, including Telstra Corporation Ltd (ASX: TLS) that had a whopping 44% share and looks a big winner from today's ACCC decision.
The ACCC is not due to give its final decision to March 28 and TPG has announced it hopes to persuade the ACCC to change its mind.
This looks unlikely, but not impossible, if the ACCC accepts TPG does not even have a properly operating mobile network business as yet.
