VHA and TPG need a Plan B

Report Overview

VHA and TPG need a Plan B

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VHA and TPG need a Plan B
The ACCC has opposed the $15bn merger between TPG and VHA. In the ACCC’s view the proposed merger will reduce competition in mobile services as TPG would be precluded from becoming the fourth mobile operator.
TPG has announced that it has ceased the rollout of its mobile network and will not become the fourth mobile operator.
VHA now wants the Federal Court to find that the proposed merger is not anti-competitive, so the merger can proceed.
On 30 August 2018, TPG and VHA formally announced their plans to merge[1] to create a third full service telco provider in Australia with a combined enterprise value of A$15bn, pro forma revenue of A$6bn and EBIDTA A$1.9bn. Shareholding is split 50.1% VHA - 49.9% TPG, with David Teoh to be non-executive chairman and Vodafone's current CEO Iñaki Berroeta to be chief executive and managing director.

Contents

Key takeaways

Background

  • VHA-TPG merger announcement
  • ACCC statement of issues for proposed TPG-VHA merger
  • TPG ceases mobile network deployment
  • ACCC Opposition and VHA Federal Court Proceedings

Federal Court Process

  • The substantial lessening of competition test and the counterfactual approach
  • How significant is the Huawei Ban on VHA and TPG?
  • Back to the future? Same, same but different? 2009 Vodafone and Hutchison Merger (four into three)

Which view of the likely future is preferred?

  • Evidence and Subject Matter Experts
  • Merger parties at a disadvantage
  • Plan B – MVNO undertaking

Our view

Conclusion

List of charts/tables

Figure 1. Comparison of key metrics

Figure 2. Shareholder split for new merged group

Figure 3. Network infrastructure synergies

Figure 4. Four potential options for TPG in the event of a no merger decision