Australia’s competition watchdog has sensationally blocked the highly-anticipated merger between Vodafone and TPG, prompting threats of legal action and plummeting share prices.
The Australian Competition & Consumer Commission (ACCC) released a brief statement on Wednesday afternoon.
“The ACCC has decided to oppose the proposed merger between TPG Telecom Limited and Vodafone Hutchison Australia Pty Ltd,” the statement read, explaining an accidental leak had forced the rushed announcement.
Later on, ACCC Rod Sims provided some clarity, citing Australia’s “already concentrated mobile services market” as the root cause of the decision.
“TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services,” Sims said.
“Wherever possible, market structures should be settled by the competitive process, not by a merger which results in a market structure that would be subject to little challenge in the future. This is particularly the case in concentrated sectors, such as mobile services in Australia.”
TPG and Vodafone announced their intention to merge last August, which was to see Vodafone take a 50.1% stake in the new company.
But recent months have proven difficult for TPG, with the telco announcing in January that it was scrapping the rollout of its mobile network due to the government’s decision to ban Huawei from local 5G networks and the ACCC instigating court proceedings over a $20 prepayment TPG slugged customers with in 2013.
TPG shares took a beating following the ACCC’s decision to block the merger, dropping almost 14% on Wednesday afternoon.
Vodafone calls the lawyers
Vodafone was straight on the front foot after the ACCC’s announcement, with CEO Iñaki Berroeta declaring the intention of legal action.
“VHA respects the ACCC process, but we believe the merger with TPG will bring very real benefits to consumers. We have therefore decided that VHA should, together with TPG, pursue approval of the merger through the Federal Court,” he said.
“The merger would create an entity that can compete more aggressively in this highly competitive market than either VHA or TPG could on their own.
“It is disappointing that the ACCC does not see it this way.”
The merger agreement has now been extended to 31 August 2020 to allow for the ensuing legal proceedings, said Vodafone.