Investors have shunned Vodafone Australia and TPG Telecom after the competition watchdog raised concerns that their merger into a $15 billion telco giant could mean higher mobile prices for consumers.
TPG shares fell as much as 18.9 per cent on Thursday after the Australian Competition and Consumer Commission, which has the power to block the merger, said the plan could reduce competition for mobile customers.
Shares in Hutchison Telecommunications – which owns a 50 per cent stake in Vodafone Australia – were even more heavily hit, falling as much as 35.7 per cent.
Outlining its concerns in a statement of issues, the ACCC said TPG currently represented a new independent competitor in a concentrated market.
It is concerned that the merger announced in August would remove the incentive for TPG – which is building its own $600 million mobile network after paying $1.26 billion in a 2017 spectrum auction – to price aggressively in an effort to rival incumbents Telstra, Optus and Vodafone.
‘Our preliminary view is the merged TPG-Vodafone would not have the incentive to operate in the same way, and competition in the market would be reduced as a result,’ ACCC chair Rod Sims said.
‘A mobile market with three major players rather than four is likely to lead to higher prices and less innovative plans for mobile customers.’
The ACCC will also look at the possible impact of removing Vodafone – which has started supplying services on the NBN – as a competitor in fixed broadband.
‘Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base,’ Mr Sims said.
TPG and Vodafone Australia both acknowledged the ACCC concerns, saying they would continue to work with the watchdog to further the merger.
‘We respect the need for the ACCC to make a carefully considered decision, so today’s announcement wasn’t unexpected,’ Vodafone Australia chief executive Inaki Berroeta said.
The ACCC is asking for responses to its preliminary concerns by January 18, and is scheduled to make its final decision by March 28.
TPG shares were still down 14.7 per cent at $6.605 at 1120 AEDT, while those in Hutchison Telecommunications were down 25 per cent at 10.5 cents.