Vodafone, TPG merger to form $15b telco giant

Vodafone, TPG merger to form $15b telco giant

TPG and Vodafone Australia have agreed to merge and create a $15 billion competitor to market leaders Telstra and Optus.

Deutsche Bank and BofA Merrill Lynch advised Vodafone Hutchison Australia.

Vodafone and HTAL's shareholdings in MergeCo, and the remaining VHA net debt of approximately A$4.8 billion that will not be contributed into the merged company, will primarily be held through an entity jointly owned by the Vodafone Group and HTAL.

While VHA is now Australia's third-largest mobile operator, TPG is one of the country's largest internet service providers.

The merger will have to work through regulatory approvals from both the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB) before it is completed, which is not expected until next year. Stocks in TPG Telecom jumped 18%.

TPG is also in the process of building a mobile phone network, but with the Vodafone network poised to join TPG's business, analysts are asking does the merged company need this new network? TPG sits behind Telstra as the biggest broadband provider in the country, but has been looking to shore up its mobile services in Australia in recent months.

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Parallel to the merger agreement, TPG and Vodafone Australia have also signed a joint venture agreement to acquire a 5G spectrum at an auction by the federal government later this year.

Nick Read, CEO-designate of Vodafone, said: "This transaction accelerates Vodafone's converged communications strategy in Australia and is consistent with our proactive approach to enhance the value of our portfolio of businesses".

Mr Berroeta said the market ultimately needed "strong players" to take on Telstra and Optus, adding that competition wasn't necessarily about "many small players". The company will be listed on the Australian Securities Exchange and called TPG Telecom.

Vodafone is Australia's third-largest mobile operator but has struggled to compete with its larger rivals, the merger with TPG will provide it with more assets to step up the challenge to its rivals and ensure more competitive pricing across the industry, and an increase in marketing activity from all parties.

Now trading at 169.08p, down 2.23 per cent as of BST 11.12, Vodafone PLC (LON:VOD), like many other companies on the Index, is struggling to gain momentum as GBP strength soars.

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