Hutchison Future in Question if Voda Merger Denied: Hutch CEO

CEO Nigel Dews warns the telecom provider’s future could be in doubt if the company's proposed merger with Vodafone is rejected by the ACCC.

Hutchison Telecoms has flagged that its future in Australia could be in doubt if its proposed merger with Vodafone is not given the green light by the ACCC, its CEO Nigel Dews has said.

Speaking today at the company’s annual General meeting, Dews said Hutchison had provided more information to the competition regulator advancing its argument that the merger would deliver greater competition, a better deal for customers and further investment in the mobile market.

Dews suggested that a decision by the ACCC to decline the merger would affect Hutchison's long-term position in the Australian market.

“Not only do we feel this merger is key for the future growth of Hutchison, it will have a major impact on the sustainability of our position in the broader industry,” he said.

“One of the challenges we face is the need for capital investment if we are to continue to grow our business at the current rate. The merger with Vodafone will enable us to meet this challenge.”

Despite building up Hutchison’s 3 business over the past six years, competition in the industry remained fragile due to a dominant Telstra, Dews said.

According to Dews, Telstra took some 54 percent of the EBITDA in the mobile phone market during 2008, whereas 3 took just four percent.

“Continuing to grow our share will require ongoing capital investment, particularly for data services, and the merger provides an effective route to make this possible,” he said.

Despite concerns over a decrease in competition, Dews said that the merger would improve competition and transform the way incumbents operated. Consumers would also benefit from more choice, greater services and value for money, Dews said.

“Once the proposed merger with Vodafone Australia is approved by the ACCC -- something I and confident will occur -- we will be well placed to continue to grow organically, invest in the business and become the number two player in the market,” Dews said.

The combined business, Vodafone Hutchison Australia, would have some 6 million customers, revenue of about $4 billion and a market share of 27 percent, Dews said. Cost savings as a result of the merger were expected to be in the order of $2 billion.

The comments follow the release today of Hutchison’s 2008 financial results. The company saw revenues of $1.6 billion, an EBITDA of $200 million and a decrease in capital expenditure of $200.2 million, down 25.2 percent.

As flagged in April, the company also reported that it had boosted its 3G coverage to 96 percent of the population.

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More about Australian Competition and Consumer CommissionHutchisonTelstra CorporationVodafone

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