ACCC approves Voda-Hutch merger

New VHA merged entity will have the scale and scope to challenge Optus and Telstra

Following a three month investigation, the Australian Competition and Consumer Commission (ACCC) has given the greenlight for the merger of telecommunications companies Vodafone and Hutchinson to go ahead.

Explaining its decision, the competition regulator said the changing nature of the mobile telecommunications industry and the increasing need for mobile network operators to have sufficient scale to be able to continue to make significant investments in their network capabilities was a significant factor in the decision.

A spokesperson from the ACCC said that, absent the merger, the parties would have been unlikely to sustain the significant investment in their mobile networks needed to provide competitive high speed data services.

“Ongoing investments are needed to meet the increased customer demand for bandwidth-hungry data services, including mobile broadband. In this respect, the ACCC considers that mobile voice and data services will continue to converge in the future," Graeme Samuel, Chairman of the ACCC, said in a statement.

The ACCC also said that as a result of the merger, Vodafone and Hutchison would able to sustain vigorous price competition in the longer term.

Similarly, the pricing commitment issued on 25 May 2009 by the merger parties has not had any bearing on the ACCC’s decision, it said.

“Behavioural measures, such as this, are generally viewed by the ACCC as an unattractive merger remedy,” Samuel said. “Such measures are not likely to be considered acceptable by the ACCC to assuage competition concerns.”

Vodafone has 3.97 million customers and 300,000 mobile virtual network operator (MVNO) customers in Australia. Hutchison, under its 3 brand, has more than 2 million customers.

Jason Leung, analysts at IDC, said the research firm believed the merger would be unlikely lessen competition.

"In fact, the opposite is a more likely scenario if VHA are to introduce innovative and competitive products and solutions to the market," he said. "VHA as a merged entity will have the scale and scope to pose a serious threat to Optus and even get Telstra's attention. Having three strong mobile operators in the market will enhance competition and in turn force the rest of the market to respond to competitive moves."

He said neither Vodafone nor Hutchison were considered strong, long-term businesses, and therefore it was unlikely that large investments would have been made beyond the already-announced and in-progress upgrades if the merger had been turned down. "Vodafone and Hutchison '3' as separate entities would unlikely be able to sustain competitive pricing, particularly as both service providers do not own their entire networks, or have roaming agreements with other network providers," he said. "Once VHA have successfully merged and consolidated assets and networks, we should see a long term serious and stable competitor who will be able to continue vigorous pricing strategies."

Tags Australian mobile marketIDCacccVodafonevhahutchison

More about Australian Competition and Consumer CommissionAustralian Competition and Consumer CommissionetworkHutchisonHutchison WhampoaIDC AustraliaOptusTelstra CorporationVHAVodafone

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