Money Matters - Simplified

Questions raised over Hutchison, Vodafone merger

Shoppers walk past a Vodafone store. Questions have been raised by ACCC over its proposed merger with Hutchison

Sydney, April 2: The proposed merger between 3G mobile phone operator Hutchison Telecommunications Ltd. (HTA.AU) and Vodafone PLC (VOD) has raised many eyebrows.

The proposed merger would cut the number of mobile network operators in Australia to three from the present four.

Australia's antitrust regulator, Australian Competition and Consumer Commission (ACCC), has raised the objection that the proposed merger, announced on Feb. 9, will limit competition for mobile telephony and mobile broadband, and hence increase the prices.

The ACCC also pointed a finger at the merged group’s enhanced ability to observe its rivals' plans for network investment.

“The ACCC is concerned that the removal of Hutchison as a vigorous and effective competitor will lead to increased prices for customers in the retail mobile telephony and MBB services segments in the retail mobile telecommunications services market,” the ACCC said in the Statement of Issues.

If the 50/50 joint venture deal between Vodafone and Hutchison comes through, the combined entity will have $4 billion in annual sales revenue, and would boast of 6 million customers. The combined entity would be known as Vodafone Hutchison Australia (VHA), and will command a 27 percent market share, next only to Optus, Australia's second-largest mobile company with 33 percent market share.

Hutchison and Vodafone, who are "each other's closest competitors" in the metropolitan and prepaid markets, appear confident that they will get a nod from the watchdog.

Canning Fok, group managing director of Hutchison Whampoa and chairman of Hutchison Australia, opined, “The Foreign Investment Review Board and the European Commission have given their approval, and we will be responding to the Statement of Issues released by the ACCC yesterday, in particular our view that the merger will deliver more competition, more investment and a better deal for consumers.”

The ACCC has asked the industry and consumer groups to respond to its Statement of Issues by April 17. The watchdog is expected to release its final report by May 6.