SYDNEY : Australia's TPG Telecom Ltd agreed a merger with Vodafone Group's Australian business on Wednesday, easing competition in the cut-throat sector and buying scale to take on bigger rivals Telstra Corp Ltd and Optus.
It combines Australia's third and fourth Largest telecom firms into a larger third player holding TPG's fibre network and Vodafone's mobile system, sending shares on the deal soaring.
The tie-up, to be called TPG, comes to Australia's telco sector faces upheaval from the rollout of a government owned broadband wholesaler, which has dented Internet profitability and driven intense price competition in the mobile market.
''When you combine the fixed and mobile-assets, the new TPG would be in a proper position to deal with Optus and a full-fledged telecom operation,'' Bernstein analyst Samuel Chen told Reuters by Phone.
It would represent a ''last chance'' for Vodafone, which has struggled with network reliability issues since entering Australia in 1993, to make a serious bid for market share, he added.
The complex transaction hands TPG shareholders 49.9 percent of a new entity, which the company say will have an implied enterprise value of A$15 billion [$11 bllion].
The rest is split evenly between Vodafone's two Australian owners, Vodafone Group and Hutchison Telecommunications [Australia]. Shares in TPG jumped 15 percent to ta near two-year high in early trade, while tightly held Hutchison shares soared 48 percent to their highest price in 11 years.
Telstra stock rose 2.5 percent and the broader market rose rose 0.2 percent.
The companies promised synergies without quantifying them and said they would prepare a joint bid to buy 5G spectrum at a government auction in November.
''This merger creates the size, scale and financial strength for us to compete with the incumbents,'' TPG Chief Executive officer David Teoh told investors on a conference call.
Vodafone Hutchinson Australia Chief Executive officer Inaki Berroeta said : ''We do mobile, they do fixed ultimately this combination is around synergies in the technology. [Reuters]
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