Is the Merging of TPG and Vodafone good or bad for us? – Dylan Gao (Eco 3)

The amalgamation of the two big telecommunication companies has been in the spotlight recently with many analysts speculating and predicting what will happen.

The merger was officially approved in court on 12 February, with Justice John Middleton saying that he believed the merger would not instantly cause competition to decease to exist and that it was unlikely in the future as well.

On the other hand, the merging of the two companies would morph the mobile market industry into a triopoly which many experts have derived is a worse position for a consumer to be in as it creates a cooperation-competition game model, in most cases, which will result in the two underdogs colluding to compete against the bigger company. In this context, the two smaller companies being the newly merged TPG and Vodafone, and Optus, the big company being Telstra. The common resultant of this is a mutual agreement on higher prices for consumers. However, this article I have referenced from is definitely leaned towards the opposition of the merger as it promotes more critical reviews of the merger in-depth while positive perceptions of the mergers are given one-liners.

In reference to another source, it was argued that the merger was good news for consumers as the long-term viability of TPG and Vodafone had looked “shaky” before the decision. The basis was that the merger would give more credibility to the joint companies and create a more even competition.

The merger of equals splits the shares from TPG to 49.9% and Vodafone 50.1%. As well as that, Iñaki Berroeta, the current CEO of Vodafone also takes the position of CEO in the newly merged enterprise, named TPG Telecom Limited, while David Teoh, current CEO of TPG takes the backseat as the Non-Executive Chairman. I believe this is due to the difference in the overall revenue of TPG and Vodafone, giving Vodafone more priorities. However, as compensation all TPG Shareholders will have fully franked credit for their shares which is great news for them.

In my opinion, I do not think the companies will end up colluding against Telstra, but will definitely add pressure as the combined force is greater, which will create a more competitive mobile market as Telstra may not necessarily rule over the others as dominantly anymore.