Vodafone TPG merger – the key take outs

Published On 08/04/2020 | By Carla Massaria | Litigation, Mergers

This article was written by Caroline Coops and Carla Massaria.


The Federal Court’s highly anticipated decision on the Vodafone Hutchinson Australia (Vodafone)/TPG Telecom (TPG) merger was handed down on 13 February 2020.[1]

Vodafone is one of three mobile network operators (MNO) in Australia in the retail mobile market, alongside Telstra and Optus. TPG’s operations largely focus on fixed-line services.

In 2017, TPG announced it would roll-out a mobile network. TPG abandoned these plans in 2019 when the Federal Government imposed a ban on equipment provider Huwaei, whose equipment was pivotal in enabling TPG’s transition from a 4G to 5G network. In the meantime, Vodafone and TPG announced their plans to merge in August 2018.

The parties sought informal merger clearance from the ACCC, which was opposed in May 2019 on the basis that the merger would substantially lessen competition in the retail mobile market (previously blogged about here). The parties challenged this in the Federal Court and were successful in obtaining a declaration allowing the merger to proceed. On 5 March 2020, the ACCC announced it would not appeal the decision.

We have summarised the judgement and key takeaways below.

Key arguments and the Federal Court’s decision

Central to the ACCC’s case was that if the merger was not allowed then TPG would revive its past plans to build a mobile network, ensuring an effective fourth MNO competitor in the supply of retail mobile services.

The merging parties argued that:

  • TPG was not going to adopt its past plans to build a mobile network;
  • if TPG did roll-out a mobile network it would not be able to compete effectively with other MNOS; and
  • the merger would be pro-competitive.

The Court agreed with Vodafone/TPG, finding that the opportunity for TPG to build such a network had passed, and that the merger would not substantially lessen competition.

Will they, or won’t they?

Merger decisions are highly contextual to the merging parties and market in question, and the Court took a pragmatic approach in concluding that TPG would not recover its plans to build a mobile network. Hard evidence from market participants (particularly TPG chairman David Teoh and mobile network expert Mike Wright) was preferred over economic theory, including:

  • Market evolution: The retail mobile market, an aggressively competitive market, had evolved rapidly from when TPG first announced its plans to build a mobile network in 2017. Telstra and Optus now widely advertise its 5G capabilities and offer more data at lower price points. TPG would no longer be an “effective disruptor”, in a market that was heading to 5G, because of the equipment impediments it faced in building a 5G network and the lower costs/higher data inclusions MNOs now offered.
  • Financial constraints: TPG no longer had the financial capacity to roll-out a 5G upgradable network, and nor would it in the future. The ACCC proposed funding measures TPG could pursue, which were not accepted by the Court. Justice Middleton also determined that a capital raising was not feasible (TPG had already conducted a significant capital raising when it initially planned to roll-out its network, in order to purchase large amounts of spectrum).
  • Network limitations: There were technical shortcomings in TPG’s mobile network designs which would result in capacity and coverage issues and low-quality service for its customers, and a lack lustre competitive presence against other MNOs.

Merger analysis is a forward-looking exercise, requiring a degree of speculation by the courts to determine what the future looks like “with” or “without” the merger.[2] The judgement shows that the commercial reality is more important to this analysis than past circumstances. The ACCC cannot will an outcome into existence that does not appreciate changes to a business’s circumstances or the market.

Quality over quantity

The ACCC were insistent that TPG entering the retail mobile market as a fourth MNO would result in competitive constraints on Vodafone, Optus and Telstra. The Commission was fearful of a future “with” the merger because it would effectively lock in a three-player market, asserting this is bad for consumers.

However, the Court criticised the ACCC for trying to “engineer a competitive outcome”, highlighting that it was the “quality of competition” that must be assessed, and not necessarily the number of players in the market.[3]

The Court found that the merger would not substantially lessen competition, and going so far as to imply that the merged entity (MergeCo) would increase the parties’ competitiveness on the basis that:

  • together, TPG’s and Vodafone’s spectrum would increase MergeCo’s network capabilities and quality and its ability to compete with other MNOs;
  • the combination of Vodafone’s and TPG’s mobile and fixed-line businesses would create cross-selling and bundling opportunities;
  • MergeCo could invest in network capacity and roll-out 5G faster because of an improved balance sheet; and
  • if the merger did not proceed, Vodafone’s network would quickly become capacity constrained without TPG’s spectrum holdings.

The Court has embraced the idea that a lesser number of market players is not necessarily problematic for competition. Again, there was a focus on the existing state of the retail mobile market and the business capabilities of the parties, rather than relying on a theory that “4 is better than 3” and the ACCC’s idea of what the industry should look like.


Chair of the ACCC, Rod Sims, has advocated for reform to our merger control laws in the past, expressing difficulty in proving that a merger would breach Australian competition laws under the current regime. Mr Sims believes the courts are not sceptical enough of self-serving testimony by the merger parties”. The Commission Chair was particularly vocal on this after the Federal Court allowed Pacific National’s acquisition of Aurizon’s Acacia Ridge terminal last year. It would unsurprising if the ACCC uses the Vodafone/TPG decision to further serve its agenda for merger reform.

[1] Vodafone Hutchinson Australia Pty Ltd v Australian Competition and Consumer Commission [2020] FCA 117.

[2] Competition and Consumer Act 2010 (Cth) s 50.

[3] Vodafone Hutchinson Australia Pty Ltd v Australian Competition and Consumer Commission [2020] FCA 117, [11].

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About The Author

is a graduate in the Competition and Regulatory team in Melbourne.

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