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Vodafone Hutchison Australia and TPG Telecom have announced plans to merge in a deal worth $11bn in an effort to challenge telecommunications incumbent Telstra and Optus who are the predominant operators in the country.

It has been reported that under the proposal tabled Vodafone Australia, which is privately owned by Hong Kong-based CK Hutchison and Britain’s Vodafone Group will hold the majority stake at 50.1%. TPG Shareholders would own the remaining 49.9% of the entity which would be called TPG Telecom Limited and would be subsequently publicly listed on the Australia Securities Exchange.

TPG chairman David Teoh said the primary objective behind the merger agreement is to establish an entity that can provide formidable competition to both Telstra and Optus.

Teoh said, “With this merger, we will be a more formidable competitor against Telstra and Optus. The characteristics that have made TPG what it is today are innovative, customer-focused and bold -and will be magnified through this combination of such highly complementary businesses."

TPG is one of Australia’s largest internet service providers and has established a stellar reputation as a trusted brand. It has a fixed-line residential subscriber base of over 1.9 million people which incorporates the corporate, wholesale business and government sectors.

Vodafone Hutchison Australia (VHA) is the nation's third largest mobile operator with a customer base of around 6.0 million subscribers.

Vodafone Hutchison Australia CEO, Inaki Berroeta, said the two companies together would provide scale and financial strength to compete more effectively.

"The combination of our two highly complementary businesses and talented employees will create a more sustainable company, with enhanced capacity to invest in new technology and innovation," he said. We are confident that this merger will be highly beneficial to customers, shareholders and other stakeholders. The combination of the two companies will create an organization with the necessary scale, breadth and financial strength for the future.”

In addition to this, it has been disclosed that Berroeta will resume the role as chief executive of the merged business, while Teoh will be its chairman.

The deal is expected to be completed next year, and will be subjected to stringent approval process from regulators including the Foreign Investment Review Board and competition watchdog.