Vodafone is the London-based British telecommunications company that offers services in the regions of Asia, Africa, Europe, and Australia. It is ranked second among the world’s mobile operator groups after China Mobile with 535 million customers in 2018. It directly operates network in 25 countries and uses partner networks in 47 further nations. It is the eighth largest company in the list of London Stock Exchange with a net worth of GBP 52.5 billion in 2016. The company through its Vodafone Global Enterprise offers IT and telecom services to corporate customers in almost 150 countries.
Vodafone is the third largest mobile network operator in Australia after Telstra and Optus. It is today, August 30, 2018, the company has confirmed its merger with TPG, a leading fixed-line broadband provider in Australia, to introduce a new company that will be worth AUD 10.9 billion (USD 8 billion). The newly formed company will increase the market competition for Telstra and Optus by providing cheap data plans to the consumers. The Australian business of Vodafone is a joint venture with Hong Kong’s CK Hutchison, which will own 50.1 per cent of the new entity and TPG will own the remaining share.
The joint venture of TPG and Vodafone will invest in 5G technologies, which will deliver swift services around the country. They are planning to bid for a portion of the 5G wireless spectrum in Australia in the upcoming government auction through this new venture. Both the companies will continue with the same brand names for some time in the nation. The merger also excited the market investors, which resulted in the increased share values of both the organizations. TPG’s shares increased by 16%, whereas, the shares of Hutchison Australia telecommunications, a joint venture of Vodafone Australia and CK Hutchison have skyrocketed by 52%.
The telecommunications industry of Australia was little fragile in the recent years with the increasing job cuts, problems in integrating new technologies and demands of the customers. For instance, Optus closed 36 retail stores around the country, stepped back from Virgin Mobile service and slashed more than 1,000 jobs in 2018. Similarly, Telstra has also announced in June 2018 that it is going to cut down around 8,000 jobs in a bid to reduce its operational costs. In this situation, the merger of TPG and Vodafone might help in stabilizing the market and improve the revenue of the industry.
The deal between TPG and Vodafone will have a combined value of around USD 15 billion and annual revenue of USD 6 billion. It is subject to approval from different regulators like the Foreign Investment Review Board and Australia’s competition watchdog, and the Australian Competition and Consumer Commission. David Teoh, the founder of TPG will be the chairman of the joint venture and the boss of Vodafone, Iñaki Berroeta will act as the managing director and chief executive officer. With almost equal share of both the companies, the deal is considered as the merger of equals.
As of now, there will be no change in the mobile and data plans of both the companies. Once the merger is completed, the companies assure that the consumers of Australia would be benefitted with the faster internet and mobile services at reduced prices compared to other two mobile operators. The deal will also increase the efforts of both the organizations to introduce 5G technology in the country. The joint venture of these companies can offer a wide range of services to the customers and own the infrastructure necessary for rapid services and competitive solutions to the local customers.
Although the deal is to take over the business of Telstra and Optus, there are arguments that this deal will please the other two operators as it can reduce the threat of price war. Additionally, the plans of TPG to emerge as a separate mobile operator will be postponed for now, and it would not create any pricing situation that can hinder the market of Vodafone in the country. Telstra and Optus may feel happy with this merger as it will reduce the severity of market competition to some extent currently.