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Here’s why TPG Telecom may get its Vodafone merger approved by October

The News Corp media is reporting that a Federal Court judge has agreed to hold a trial starting on September 10 to rule whether or not the proposed merger between TPG Telecom Ltd (ASX: TPM) and Vodafone Australia should be blocked on competition grounds.

It was back in late August 2018 that the two telcos announced their intention to merge, but it took the competition regulator the ACCC 9 months to conclude in May 2019 that the merger should be blocked.

The ACCC’s main reasoning being that TPG could build its own 5G network to compete with giants like Telstra Corporation Ltd (ASX: TLS) or Optus.

However, asking a small player like TPG that already carries a swag of debt to build new infrastructure that costs of billions of dollars (on top of billions of dollars needed to acquire spectrum) does not look realistic.

After all the reasoning given for the merger was that Vodafone and TPG would have more opportunity to compete in this space if they had the combined financial firepower to do so. While a judge may also conclude it’s not the job of the ACCC to guess the future on little evidence.

If the case does start on September 10 a ruling could come in within a month, although the ACCC is reportedly already complaining it needs more time to prepare for the case.

Of course the ACCC’s dithering will have already cost TPG, its shareholders, and potentially even Australian consumers a lot of money if the court does throw out its decision to block the merger.

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Motley Fool contributor Tom Richardson owns shares of TPG Telecom Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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