Federal Court approves the TPG Telecom-Vodafone Australia merger

The shares of TPG Telecom Ltd (ASX:TPM) and Vodafone Hutchison Telecommunications (Aus) Ltd (ASX:HTA) could be on the move after the Federal Court approved their merger…

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This morning the Federal Court revealed its eagerly anticipated judgment in relation to the proposed merger between telco companies Vodafone Hutchison Telecommunications (Aus) Ltd (ASX: HTA) and TPG Telecom Ltd (ASX: TPM).

What has happened?

In May 2019 the Australian Competition and Consumer Commission (ACCC) decided to oppose the proposed merger of the two companies.

It felt a merger between TPG Telecom and Vodafone Australia would reduce competition and contestability in this sector.

The competition watchdog concluded, in particular, that the proposed merger is likely to substantially lessen competition in the supply of mobile services because the proposed merger would preclude TPG entering as the fourth mobile network operator in Australia.

This decision did not go down well with TPG Executive Chairman, David Teoh. He said: “While we respect the ACCC’s process, its decision has significant implications for Australian consumers, and in our view, must be challenged.”

“TPG remains of the firm belief that the proposed merger will result in greatly enhanced competitive dynamics in the Australian telecommunications industry, as well as superior choice and outcomes for consumers,” he added.

In light of this, Vodafone Australia and TPG Telecom decided pursue proceedings in the Federal Court to overturn the decision. This morning the Federal Court announced its decision.

What did the Federal Court decide?

The Federal Court has decided to overturn the ACCC’s decision and approve the merger between TPG Telecom and Vodafone Australia.

The court did not believe the merger would reduce competition in the Australian telco market.

This means telco giants Telstra Corporation Ltd (ASX: TLS) and Optus will now have a new (and larger) challenger to contend with.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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