The Australian Consumer and Competition Commission (ACCC) has finally approved the proposed amalgamation of Vodafone Australia Ltd. and Hutchison 3G Australia Pty Ltd. (branded as '3') into Vodafone Hutchison Australia (VHA), on the grounds that the merger would not reduce the competition in the retail telecommunications market.
The 50:50 merger deal between the two major mobile operators in the country was announced earlier in February.
''A key consideration in the ACCC's investigation was whether increased concentration in the mobile sector would result in reducing pricing pressure for retail mobile telecommunications services. It considered evidence that, individually, without this merger, the parties would not sustain vigorous price competition in the longer term,'' said the ACCC in a statement.
Welcoming the competition regulator's decision, the Vodafone CEO (Asia Pacific & Middle East) and the would-be chairman of VHA Nick Read, said, ''The ACCC's decision confirms our view that this merger will be good news for Australian customers. VHA will be a stronger mobile company, more competitive and more capable of providing an even better deal for customers.''
Vodafone and '3' plan to complete the joint venture transactions by next week. The new company VHA will be traded as Vodafone in the stock exchanges.
As per the deal, VHA has to pay A$500 million to Vodafone within 18 months to even up the differences in the valuations of Vodafone and '3'.
Last week both the companies assured customers that they will be able to enjoy the same great value offered on all existing voice and data plans for the next 2 years. (See: Vodafone, 3 Australia try to allay monopoly fears)
The Hutchison CEO and the proposed chief executive of VHA Nigel Dews said, ''Our first priority is to retain the best elements of both independent brands. The next step is to apply the combined scale and resources of VHA to deliver real benefits to all customers.''
VHA announced that it will continue to market products and services under both brand names and all respective network arrangements, caps and plans, retail outlets and customer service capabilities will remain unchanged for the foreseeable future.
The company also confirmed that all the mobile handsets and broadband services would operate as normal with no change in customer's phone numbers and account credits.
It is believed that the merged entity would be better equipped to take on major rivals Telstra, Australia's largest telecom company and Optus, a unit of Singapore Telecommunications, the second largest. The two operators together with VHA have a combined mobile market share of 95 per cent.
The merger already got the approvals from Australia's Foreign Investment Review Board (FIRB), shareholders of both the companies and the European Commission (as Vodafone is based in UK).
On the deal, ACCC chairman Graeme Samuel said: "Ongoing investments are needed to meet the increased customer demand for bandwidth-hungry data services, including mobile broadband. In this respect, the ACCC considers that mobile voice and data services will continue to converge in the future.''
Vodafone has a customer base of 4 million with 100,000 broadband users whereas '3' has 2 million customers and 260,000 broadband users.
Analysts feel that the merger between the third and fourth largest companies in the telecom sector could see scores of job losses as the companies rationalise their operations for sustained growth.
Nigel Dews indicated, "The first priority is around people and getting the organisation and the organisational structure sorted out. "The majority of duplication is in the head office functions so the majority of the redundancies will be there. We're working through numbers at the moment."
Telecom Australia, which was the trading name of the state-owned telecom bodies that were the forerunners of Telstra, bought a 10-per cent shares in Hutchison Telecommunications in 2001, the Australian subsidiary of Hong Kong-based Whampoa for A$400 and holds a seat in the Hutchison board. Further to the merger, the company will have a stake of 5 per cent in VHA.