Vodafone Hutchison Australia Pty and TPG Telecom Ltd yesterday announced plans to merge into a A$15 billion (US$11 billion) unit to take on key rivals Telstra Corp and Singapore Telecommunications Ltd’s Optus as competition heats up in the telecommunications sector.
According to the proposal Vodafone Australia — privately owned by Hong Kong-based CK Hutchison Holdings Ltd (長江和記實業) and Britain’s Vodafone Group PLC — will hold the majority stake at 50.1 percent.
TPG shareholders would own 49.9 percent of the entity, which will be called TPG Telecom and listed on the Australian Securities Exchange with a combined revenue of more than A$6 billion.
“With this merger, we will be a more formidable competitor against Telstra and Optus,” TPG chairman David Teoh (張大衛) said.
The so-called “merger of equals” will allow the two companies to better invest and drive innovation and product improvement to give customers more choice, they said.
TPG is an ASX-listed telecommunications provider and is one of the nation’s largest Internet service providers.
It has a fixed-line residential subscriber base of more than 1.9 million people and corporate, government and wholesale business.
Its share price surged more than 11 percent in morning trade in Sydney to A$8.77 on the news.
Vodafone Hutchison is the nation’s third-largest mobile operator with a customer base of about 6 million subscribers.
Their merger is bad news for market leader Telstra, one of Australia’s largest employers, which earlier this month warned of “enormous challenges” ahead after posting an 8.9 percent slump in annual profit.
Telstra chief executive officer Andy Penn said that intense competition for mobile customers and changing market dynamics were affecting business.
In a bid to stay a step ahead of its rivals, Telstra plans to axe 8,000 jobs — one-quarter of its workforce — to achieve more cost savings and split its mobile and infrastructure divisions into separate businesses.
Vodafone Hutchison chief executive officer Inaki Berroeta said the merged companies would provide scale and financial strength to compete more effectively with the likes of Telstra.
“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,” Berroeta said.
“We are confident that this merger will be highly beneficial to customers, shareholders and other stakeholders,” he said.
Berroeta is to be chief executive officer of the merged business, while Teoh is to be chairman.
The deal is expected to be completed next year, subject to approval from regulators, including the Australian Foreign Investment Review Board and competition watchdog.
Separately, TPG said it planned to spin off to its shareholders its mobile business in Singapore, with further details to be provided at a later date.
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