The merger will have to work through regulatory approvals from both the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB) before it is completed, which is not expected until next year. Vodafone has a sizeable mobile network with a mobile customer base of approximately 6 million subscribers as of June 2018. Telstra rose 2.9% as investors viewed the deal as more favourable to Australia's former phone monopoly than TPG's plan to build its own network, which might kick off a price war.
Their merger is bad news for market leader Telstra, one of Australia's largest employers which earlier this month warned of "enormous challenges" ahead after posting an 8.9 percent slump in annual profit.
Nick Read, CEO-designate of Vodafone, said: "This transaction accelerates Vodafone's converged communications strategy in Australia and is consistent with our proactive approach to enhance the value of our portfolio of businesses". Shares in Hutchison Telecommunications Australia (a shareholder in Vodafone Australia), leapt to 18 cents, up 445 on the day and 240% in the month so far.
The so-called "merger of equals" will allow the two companies to better invest and drive innovation and product improvement to give customers more choice, they said.
TPG is now Australia's third largest telco provider, while Vodafone Hutchinson Australia sits in fourth place.
TPG chairman and chief executive David Teoh (and major shareholder in TPG), said in a statement the tie-up represented an "exciting step-change" in the company's evolution.
An announcement from the two telcos said that VHA expected to have net debt $1.94 billion (plus an $80 million spectrum instalment at the end of January) following a restructure its existing debt facilities by its owners, Vodafone and Hutchison.
"You just have to look at the amount of capital that Vodafone has placed in this infrastructure over the years and that's something that usually links investors to the asset for a long time", Inaki Berroeta, Vodafone Hutchison Australia's chief executive officer, told reporters on a conference call.