Expert predicts Vodafone/Hutchison merger will hurt competition

Just days after the Australian Competition and Consumer Commission flagged concerns over the proposed merger between Vodafone and Hutchison, a leading telecommunications analyst has followed suit.

Warren Chaisatien, research director and principal analyst of Telsyte, says that the proposed merger may lead to less price competition and innovation in the telco industry.

“Overall I think it is a very good move for the industry, and I can expect that the merged entity will deliver better coverage and covering overall,” he says.

“However the big question mark that no one knows is how this measure will translate into a more competitive market from a pricing perspective.”

Chaisatien says that he agrees with the concerns of the ACCC, and wants to know how consumers will receive the same type of price competition delivered by Hutchison.

“When you look at these two organisations, they have been innovative mobile operators as opposed to larger competitors like Telstra and Optus, and after a merger I can see very little compelling reason for them to challenge each other on price.”

The proposed merger will see Vodafone and Hutchison operate under a new entity titled “VHA” while keeping the Vodafone brand.

“In the past, the pricing for mobile services, VoIP and data have been declining rapidly because of the introduction of capped plans on data usage.

“That has been very good for the industry because it has driven growth. But those capped pricings were being headed by Hutchison or Vodafone, never the bigger companies.”

While Chaisatien admits that Optus could introduce more competitive pricing arrangements after it is knocked out of the number two spot by VHA, it is unlikely.

“We could see innovation and price competition coming from Optus as they become more defensive, however they have not been known as a price leader – it’s a possibility but not a strong one,” he says.

Related articles:

• Optus worried about Vodafone/Hutchison merger
• ACCC says Hutchison and Vodafone merger could push prices higher