Vodafone and Hutchison merger gets green light from ACCC

The Australian Competition and Consumer Commission has approved the merger of telecommunications giants Vodafone and Hutchison, despite the competition watchdog’s initial concerns over how the move would affect market competitiveness.

The two groups will now begin working towards the merger, which was approved by shareholders in April, with the transaction reportedly to be complete within the next fortnight.

Hutchison chief executive and proposed chief executive of the new Vodafone Hutchison Australia (VHA) entity, Nigel Dews, said in a statement that work will begin very soon.

“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,” he said.

Vodafone said in a statement that the two companies will keep the current brands, network arrangements, contract plans, retail stores and customer service operations “for the foreseeable future”.

Ovum analyst Nathan Burley said that “the ACCC made the correct decision and will provide long-term health for the industry”, but a lot of work will be done before the merger is complete.

“I suspect what will happen firstly is that the two companies will have an internal process to go through, cutting costs, etc. The initial focus may be on improving margins in their business. They are a fair way behind where Telstra and Optus are now in their mobile businesses.”

Meanwhile, the regulator said that its decision was not swayed by a statement released by the two groups just days before, which promised to maintain current pricing for two years to relieve the watchdog’s fears of market anti-competitiveness.

“Behavioural measures, such as this, are generally viewed by the ACCC as an unattractive merger remedy,” chairman Graeme Samuel said. “Such measures are not likely to be considered acceptable by the ACCC to assuage competition concerns.”

The ACCC said it ran a three-month investigation of the two companies’ plans, “which included scrutiny of a substantial number of internal documents from the merger parties and their competitors”.

The watchdog also considered that due to “the changing nature of the mobile telecommunications industry”, companies must continually upgrade networks.
It found that if the merger did not go ahead, both companies “are unlikely to sustain the significant investment in their mobile networks to provide competitive high-speed data services”.

Samuel said that ongoing investments are required to help meet consumer demand for high-speed services such as mobile broadband.

“In this respect, the ACCC considers that mobile voice and data services will continue to converge in the future,” he said.