$15 Billion TPG–Vodafone Merger Announced in Competitive Bid

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Talks of a TPG–Vodafone Merger have been well underway for over a week. Today TPG Telecom Limited [ASX:TPG] and Vodafone Hutchison Australia Pty Ltd [ASX:VHA]  confirmed a proposed merger of equals between the two companies.

The merger will create a new group listing on the ASX, under the name TPG Telecom Limited. But Vodafone will have majority stake at 50.1%, leaving TPG’s stake at 49.9%.

Today shares of TPG are trading at $9.20, up 16. 75% since news of the merger proposal.

How the TPG–Vodafone Merger is set to challenge Telstra and Optus

Australia’s third and fourth largest telecommunication companies have come together in what TPG estimates will be a $15 billion company, in order to provide greater competition against Telstra and Optus.

TPG made a statement that, ‘The merger will create a more effective challenger to Telstra and Optus.

However before the merger gets the go ahead, the companies must gain approval from the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB).

The merged entity will keep directors from both companies. David Teoh TPG’s chief executive will become the non-executive of the combined group. Vodafone’s chief executive Inaki Berroeta will become CEO and managing director after the merge.

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The TPG–Vodafone Merger is intended to maximise opportunities and place the merged entity in a good position to invest in 5G technologies. Hopefully the merger will deliver faster services and offer more competitive value to Aussie customers.

What shareholders should know about the TPG–Vodafone merger

The merger will be subject to various conditions from shareholder, court and regulatory approvals. Of course shareholders will be notified of required approvals that are come, so stay tuned.

Alongside the merger agreement, both TPG and VHA have signed a separate joint venture agreement. The joint venture is to acquire, hold and allocate 3.6 GHz spectrum, which the government is auctioning 125 MHz of in November 2018.  The 3.6 GHz band is internationally recognised as a band that telecommunications companies can use for new 5G networks. The auction is in place so no independent bidder such as Telstra can exclude other telcos.

The joint venture is ongoing, and will not be affected if the merger fails to be approved.


Ryan Clarkson-Ledward,
For Money Morning

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About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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