ACCC says Hutchison and Vodafone merger could push prices higher

The Australian Competition and Consumer Commission has signalled that it has problems with the proposed merger between telco giants Vodafone and Hutchison, saying it may reduce the level of aggressive price competition in the telecommunications industry.

The corporate watchdog said in an issues paper released last night that it wants the telco industry to respond to its concerns.

“The ACCC’s preliminary view is that the proposed merger raises competition concerns in the short to medium term,” the paper says. “The ACCC is concerned that the removal of Hutchison as a vigorous and effective competitor will lead to increased prices for customers.”

Vodafone Australia and Hutchison announced the merger in February, which would see the formation of a new “VHA” entity that would cover six million customers and earn $4 billion in revenue.

The two companies plan for Hutchison’s 3 brand to be eliminated, while all existing 3 customers will come under the Vodafone brand.

But the ACCC is concerned over the fact that the two companies are direct competitors, focusing their services towards “price-sensitive customers in metropolitan areas”.

“Hutchison has competed aggressively for market share in the national market for supply of retail mobile telecommunications services, consistently attracting a relatively high proportion of customers from the other three mobile network operators.”

If the merger is to go ahead, the combined company, along Telstra and Optus, would control 95% of the mobile telephone market.

The ACCC has also said that the joint relationships between the three telcos would lead to price collusion, while the merger may conclude with “increased concentration” of mobile carriers.

It also said that the combined entity’s reseller partners are “unlikely to constrain the merged entity”.

The ACCC says it plans to publish its final view on the proposed merger by 6 May.

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