TPG Telecom responds to ACCC merger decision

TPG Telecom Ltd (ASX:TPM) has responded to the ACCC's decision to block its merger with Vodafone Australia and will appeal the decision in the Federal Court…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Late on Wednesday afternoon the ACCC revealed that it opposes the proposed merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Hutchison Australia (ASX: HTA).

Unsurprisingly, this led to their shares being sold off by investors. The TPG Telecom share price crashed 13.5% lower and the Vodafone Hutchison Australia share price sank a massive 28% lower.

Why was the merger blocked?

As I mentioned in detail here, the ACCC believes the proposed merger will reduce competition and contestability in the fixed broadband services market and "substantially lessen competition in the supply of mobile services because the proposed merger would preclude TPG entering as the fourth mobile network operator in Australia."

The competition watchdog believes that blocking the merger will result in TPG rolling out a mobile network, which would be a big positive for consumers.

This is because "TPG has a proven track record of disrupting the telecommunications sector" and "is likely to be a vigorous and innovative supplier of mobile services in Australia, offering cheaper mobile plans with large data allowances, and competing strongly against incumbents."

What now?

Both companies have acknowledged the ACCC's decision but plan to challenge it in the Federal Court.

TPG executive chairman, David Teoh, said: "While we respect the ACCC's process, its decision has significant implications for Australian consumers, and in our view, must be challenged."

He continues to believe the merger would result in greatly enhanced competitive dynamics in the industry and superior choice and outcomes for consumers.

Mr Teoh also suggested that not allowing the merger would further entrench the "enormous power" of Telstra Corporation Ltd (ASX: TLS) and Optus. Which would not be good news for the industry given the arrival of 5G internet in Australia.

He said: "With the advent of 5G next generation mobile technology, Australian consumers more than ever need a strong challenger."

In light of this, the company believes "there is a compelling case to seek orders from the Federal Court of Australia that the proposed merger will not, and is not likely to, substantially lessen competition."

Together with Vodafone Australia, the company intends to pursue proceedings in the Federal Court at the earliest possible time.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Beetaloo, Botanix, Cobram Estate, and Origin Energy shares are falling today

These shares are having a poor session on Tuesday. But why?

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »