Vodafone Hutchison and TPG, Australia’s third and fourth largest telecommunications companies, have announced a $15 billion merger to create a third giant in the telco services industry.
IBISWorld analysts are predicting the merger will likely put a stop to hints of providing $9.99 unlimited mobile plans for new customers. According to IBISWorld, the merger is expected to combine the resources of both companies to more effectively take on Telstra and Optus.
Both TPG and Vodafone bring different strengths to the merger, IBISWorld added. “Vodafone is currently the third-largest mobile network operator, with approximately 6 million customers, while TPG holds the second-largest fixed line network in Australia. The combined entity is expected to continue investing in both fixed line and mobile networks, with the aim of delivering faster services and more competitive offerings to more customers,” said IBISWorld Senior Industry Analyst Tommy Wu.
“Prior to the merger, Australians have had the choice of three providers in both mobile and broadband markets, with Telstra and Optus being the major providers and TPG and Vodafone rounding out the big three in the respective fixed line and mobile markets. As a result, the operating and competitive landscape of these markets are not projected to change significantly with the merger,” said Wu.
According to IBISWorld, TPG has already made significant investment in acquiring spectrum with the aim of building a fourth mobile network. However, the feasibility of a fourth mobile network in a small domestic market was unclear.
“The merger will likely help alleviate this concern as TPG combines their fibre network and capacity with Vodafone’s mobile network to capitalise on opportunities presented by 5G services,” said Wu. It remains to be seen whether the Vodafone and TPG brands will combine or remain separate.
“In order to avoid competition between the two brands, TPG’s aggressive discounting to push for new customers in the mobile market is likely to end, particularly $9.99 unlimited mobile plans,” said Wu.
Meanwhile, the Australian Communications Consumer Action Network said it was in favour of increasing competition and improving affordability of telco services for everyday Australians.
“We are concerned that the recently announced merger of TPG and Vodafone will reduce customer choice within the market, with fewer options available for mobile and fixed services providers, as well as an eventual consolidation of products on offer,” said ACCAN CEO Teresa Corbin. “However, we acknowledge that the new entity of TPG Limited may have greater market power to place pressure on Telstra and Optus to lower their prices, increasing affordability for consumers.”
“We hope that the merger will result in greater investment in infrastructure, such as 5G technology, and ultimately increase the availability of reliable, accessible and affordable telco services across Australia,” she added.
IBISWorld predicted that Telstra and Optus would likely welcome the merger, as it removes the threat of a fourth player crowding out the mobile market.
Vodafone Australia, for its part, assured customers it would be business as usual following the announcement of the proposed merger with TPG.
“We’re very excited about the future, but for the moment, nothing changes for our customers,” said VHA Chief Commercial Officer Ben McIntosh. “They can continue to enjoy all the things they love about us including A$5 Roaming, no lock-in handset contracts, 35-day prepaid expiry, and NBN Instant Connect and 4G Backup.”
“Customers can continue to use our services, upgrade or change plans, or join us as a new customer with confidence,” he added. “If the merger is approved, it will create even more opportunities for us as a combined entity to drive value for Australian consumers.”