Vodafone Australia merges with TPG to take on Telstra and Optus

Vodafone Australia is merging with TPG to create telecommunications giant / Vodafone

Vodafone Hutchison Australia has agreed a deal to merge with broadband provider TPG Telecom to create a telecommunications company to take on Telstra and Optus.

The $15bn merger will bring together Vodafone’s mobile network and almost six million mobile customers with TPG’s extensive fixed-line broadband services which boasts 1.9 million residential subscribers as well as corporate, government and business customers.

The merger will provide “scale and financial strength to compete more effectively with Telstra and Optus and be better able to provide innovation, service and product improvement,” according to a statement.

The new entity will be led by Vodafone Hutchison chief executive officer Inaki Berroeta and TPG Telecom’s chief executive David Teoh will be chairman. The “merger of equals” sees TPG shareholders take 49.9% stake while Vodafone Hutchison shareholders will hold 50.1%. TPG will also separate its Singapore mobile business TPG Singapore.

The merger brings new intensity to Australia’s fiercely competitive telecommunications industry, which is dominated by market leader Telstra and rival Optus.

Vodafone is Australia’s third-largest mobile operator but has struggled to compete with its larger rivals, the merger with TPG will provide it with more assets to step up the challenge to its rivals and ensure more competitive pricing across the industry, and an increase in marketing activity from all parties.

It follows an ongoing period of change for the telecommunications giants, which have undergone repeated restructures as the businesses transform from telecom businesses to mobile, internet and media organisations. Telstra recently completed its latest restructure axing 8,000 jobs across the company including its chief marketing officer Joe Pollard as it de-centralised its marketing operations.

Vodafone Hutchison Australia chief executive Iñaki Berroeta, said, “The Australian telecommunications market is characterised by the presence of Telstra and Optus. Together, TPG and VHA will provide stronger competition in the market and greater choice for Australian consumers and enterprises across fixed broadband and mobile. The combination of the two companies will create an organisation with the necessary scale, breadth and financial strength for the future."

TPG chairman David Teoh, added, “With this merger, we will be a more formidable competitor against Telstra and Optus.”

“The characteristics that have made TPG what it is today – innovative, customer-focused, bold – will be magnified through this combination of such highly complementary businesses. Together we will become a more effective industry challenger that strives to create competitively-priced consumer products with the high levels of customer service that differentiates us in the market,” said Teoh.

Vodafone Hutchison Australia is a 50/50 joint venture between Vodafone Group and Hutchison Telecoms.

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