Oz competition watchdog could block Vod-Hutch merger

Telecom Asia Staff
03 Apr 2009

Australia\'s competition watchdog has warned it could block the proposed merger between mobile operators Hutchison and Vodafone Australia.

Shareholders of publicly-listed Hutchison Australia yesterday voted overwhelmingly in favor of the deal.

But then Australian Competition and Consumer Commission (ACCC) said in a statement of issues that the merger could reduce price competition in the mobile market.

"The proposed merger raises competition concerns in the short to medium term within the mobile telephony and MBB segments of the national market," the statement reads.

The Australian mobile market is mature, the ACCC said, with mobile penetration reaching 111.4% - and 3G penetration 51.6% - in December last year. This means operators must differentiate by offering competitive pricing, but reduced competition could lower this impetus.

The ACCC said it considers Hutchison to be a credible market competitor, even though some analysts have said Hutchison and Vodafone have separately had trouble competing against Telstra and Optus.

The proposed Vodafone Hutchison Australia (VHA) would have around 6 million customers - a 27% market share - and revenues of around A$4 billion ($2.86 billion). Telstra has around 9.4 million mobile subscribers, and Optus has about 7.4 million.

At present, Vodafone has around 4 million customers, while Hutchison has a little over 2 million.

The merger would reduce the number of mobile network operators to three - VHA, Optus and Telstra - in a market that is already highly concentrated, it said. This could lead to increased prices for customers, particularly considering that Vodafone and Hutchison are each others\' closest competitors.

Also complicating the issue is that Vodafone has a network sharing deal with Optus, and Hutchison has one with Telstra, ACCC said.

This could mean the merged entity would be privy to too much information on its competitors\' network investment intentions, yet dissolving these partnerships could be so costly it would prevent VHA from making its own investments.

The ACCC is seeking comment on these issues, and intends to announce its final view on May 6.

Hutchison shareholders passed the resolution to approve the merger by 111.48 million shares to 449,129.

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