Vodafone Hutchison Australia has put its legal case forward to try to merge with the TPG Telecom Ltd (ASX: TPM).
TPG Telecom is one of Australia’s largest broadband and mobile phone providers, with around 2 million broadband subscribers. In 2018, TPG planned to merge with the owner of Vodafone Australia, Hutchison Telecommunications (ASX: HTA), in a potential $15 billion deal, with legal proceedings related to the merger ongoing.
Vodafone – TPG Merger Legal Case
The local Vodafone business has claimed that its 5G network without TPG would be smaller, slower and worse than the ones offered by Telstra Corporation Ltd (ASX: TLS) and Optus, according to a document filed with the Federal Court, as reported by the Australian Financial Review.
TPG owns a significant amount spectrum and it has better access to funding. Spectrum is very important for delivering reliability and speed to users.
Vodafone also pointed to the fact that Huawei has been banned from providing 5G equipment, which is roughly 25% to 35% cheaper than the equipment provided by Nokia and Ericsson.
Not only is the equipment more expensive but it will also lead to delays in the rollout of its 5G network because Huawei had a system that allowed 4G to be quickly upgraded to 5G.
How Will This Affect The Telco Sector?
The lodging of these documents does not really do anything at this stage. If Vodafone and TPG end up winning the case against the ACCC it could change the whole telco landscape. Rock-bottom prices could disappear as the major telcos no longer need to compete with a disruptive separate TPG.
TPG and Vodafone have a lot to win with synergies with a merger and consumers could have better choices if there are three major players and a number of smaller players to choose fro,. Only time will tell, but many commentators are quietly confident that the merger will actually go ahead.
Whatever happens, the growth displayed by the ASX shares in the free report could be better investment ideas.
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