- After a 10-month battle, the ACCC has given up the fight to block a Vodafone and TPG Telecom (TPM) merger today
- The merger was initially blocked in May 2019, but Vodafone and TPG took matters to the Federal Court
- In February 2020, the Court overturned the ACCC’s decision and gave the consumer watchdog until today to appeal
- The ACCC said it did not have the grounds to appeal, and now the merger is set to go ahead
- Further, TPG released its half-yearly financial report in tandem with today’s news
- The company has upgraded its earnings guidance and upped its interim dividend to three cents per share, fully franked
- Shares in TPG are up over seven per cent at lunchtime, currently worth $8.10 each
The Australian consumer watchdog has thrown in the towel in its battle to stop a merger between Vodafone and TPG Telecom (TPM) in its tracks.
ACCC overturned
In May, the Australian Competition and Consumer Commission (ACCC) blocked the proposed merger on the grounds that it would reduce competition in the mobile services market.
Roughly two weeks later, Vodafone and TPG took the matter to the Federal Court and asked for the ACCC’s decision to be overturned. It took 10 months, but in February 2020 the Court made the decision to let the merger go through — and chimed quite a different bell to that of the ACCC.
Justice John Middleton said the merger between the companies would likely increase competition in the mobile market rather than reduce it. The Federal Court gave the ACCC until today to appeal the green light.
The watchdog white flag
Today, the ACCC conceded defeat in the battle, though Chair Rod Sims made it known that the organisation is not pleased with the Court’s verdict.
“The ACCC remains disappointed by this outcome, which has closed the door on what we consider was a once in a generation chance for increased competition in the highly concentrated mobile telecommunications market,” Rod said.
“The future state of competition without a merger is uncertain. But we know that competition is lost when incumbents acquire innovative competitors.”
“Despite this outcome, we will continue to oppose mergers that we believe will substantially lessen competition, because it’s our job to protect competition to the benefit of Australian consumers,” he concluded.
The ACCC said it made the call to concede because an appeal would require the watchdog to establish an error of law by the judge. As such, the organisation said it did not have grounds for the appeal.
Business as usual for TPG
Being released in tandem with today’s ACCC news is TPG’s half-yearly report in which it upgraded its earnings guidance for 2020 based on some nicely bolstered half-yearly profits.
TPG originally predicted between $735 million and $750 million in earnings before interest, tax, depreciation and amortization (EBITDA) for the 2020 financial year. Today, this figure was boosted to between $775 million and $785 million.
However, profits for the half-year were only up on a statutory basis compared to the year before. According to TPG, a hefty $227.4 million one-off impairment dragged statutory profits for the first half of the 2019 financial year lower, resulting in a statutory increase in profits for the last half-year of 206 per cent.
When not accounting for one-off costs, however, profit for the most recent half-year was down roughly 30 per cent on the same period the year before at $157.9 million.
Nevertheless, the approved merger seems to have given TPG management some confidence, with a 50 per cent higher interim dividend going hand-in-hand with the upgraded earnings guidance. TPG will be paying out a fully-franked three-cent interim dividend.
Shares in TPG have gained 7.57 per cent on the back of today’s news. Currently, TPG shares are trading for $8.08 each in a $7.49 billion market cap.