Vodafone, TPG to become $15b telco giant

TPG and Vodafone announce merger

This morning the two companies - TPG and Vodafone Hutchinson Australia (VHA) - said they had agreed to terms on a "merger of equals".

"The merger will create a more effective challenger to (leading Australian telecoms) Telstra and Optus", TPG said, estimating that the resulting entity will be worth 11 billion USA dollars when the deal is finalized next year.

TPG is Australia's second largest fixed line subscriber with a base of over 1.9 million subscribers, while Vodafone Hutchison is Australia's third largest mobile operator, owned equally by Vodafone Group and Hutchison Telecommunications (Australia) Limited.

TPG Telecom will have an enterprise value of A$15.0 billion, revenue of over A$6.0 billion, EBITDA of over A$1.8 billion and OpFCF of A$0.9 billion.

The $15bn merger will bring together Vodafone's mobile network and nearly six million mobile customers with TPG's extensive fixed-line broadband services which boasts 1.9 million residential subscribers as well as corporate, government and business customers.

Separately, TPG said it planned to spin off to its shareholders its mobile business in Singapore, with further details to be provided at a later date.

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Vodafone's Australian operations will become part of a new telecoms giant.

TPG is now Australia's third largest telco provider, while Vodafone Hutchinson Australia sits in fourth place.

TPG will hold the remaining 49.9pc stake in the group, which will be listed on the Australian Securities Exchange. David Teoh, now the CEO and chairman of TPG, will become the chairman. Shares in Telstra were also up just over 2.8% yesterday to $3.23, taking their gain for the month so far to more than 14%.

The Australian Competition and Consumer Commission has said it will be commencing a public review of the proposed merger to identify any competition concerns.

Vodafone CEO Iñaki Berroeta, who will take on the role of managing director in the new company, said the merger will result in stronger competition and greater choice in the fixed broadband and mobile space.

"The combination of these assets will maximise the opportunities presented by convergence and best position the combined company to invest in 5G technologies that will deliver faster services and offer more competitive value propositions", a joint release to the ASX says.

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