On Thursday the Federal Court overturned the ACCC’s decision to block the proposed merger of TPG Telecom Ltd (ASX: TPM) and Vodafone Australia.
This news sent the TPG Telecom share price and the Hutchison Telecommunications (Aus) Ltd (ASX: HTA) share price hurtling higher.
Not everyone was celebrating, though. After initially pushing higher following the release of a solid half year result, the Telstra Corporation Ltd (ASX: TLS) share price ended up finishing the day in the red because of the news.
Is this merger a good or bad thing?
One person that feels consumers will suffer from the proposed merger is Macquarie Telecom Group Ltd (ASX: MAQ) CEO, David Tudehope,
He said: “This decision will only worsen the lack of competition, which has meant our industry continues to underserve and overcharge customers. Now that the decision has been made to allow the merger to go ahead, the Government and ACCC will need to reconsider how to improve retail and wholesale competition in mobiles.”
“The telco industry gets twice the number of complaints to the Telecommunications Industry Ombudsman (TIO) as the banking industry’s Australian Financial Complaints Authority (AFCA), its new Ombudsman, even after the Royal Commission. As a result, the telco industry risks losing its social licence,” Tudehope concluded.
This sentiment was echoed by ACCC Chair Rod Sims. He said: “Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed.”
“The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent “rational” pricing,” Mr Sims added.
Goldman Sachs also doesn’t expect this to lead to much of a change in competition in the near future.
The broker said: “In the short to medium term, we see little reason to expect the merger to have material impact on the current rationality in the Australian mobile market, suggesting less disruption in the market than expected.”
“More choice and value for Australian consumers”
One person that doesn’t agree with these views is Vodafone Australia’s CEO, Iñaki Berroeta.
In response to the news, Mr Berroeta said: “For the first time, Australia will have a third, fully-integrated telecommunications company. This will give us the scale to compete head-to-head across the whole telecoms market which will drive more competition, investment and innovation, delivering more choice and value for Australian consumers and businesses.”
The merger is expected to be completed in mid-2020, subject to the remaining regulatory/shareholder approvals, and any appeal by the ACCC.
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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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