Vodafone Australia and TPG mull merger

The Australian mobile market may be set for consolidation with the revelation that Vodafone and TPG are thinking of hooking up.

Widespread reports in Australia compelled the two companies to publicly admit they’ve been chatting. “Vodafone Hutchison Australia (VHA) confirms it has commenced discussions with TPG in relation to a potential combination of the two highly complementary companies,” said Vodafone in a statement. “At this stage, these are exploratory non-binding discussions, with no commitment from VHA or its shareholders.” TPG seems to have issued some similarly cautious statements.

TPG is a new entrant to the Australian mobile market that is expected to launch in metropolitan areas this year, making heavy use of small cells to augment a limited macro network. It has been providing some telecoms services via a wholesale agreement with Vodafone but its move into the mass market, most probably via the tried-and-tested aggressive pricing model, is expected to significantly disrupt the Aussie market.

Vodafone is the distant third of three Australian MNOs, with a 17% subscriber share according to Ovum’s WCIS. Telstra is the dominant player, controlling a narrow majority of subscribers, and thus has the most to lose by a disruptive new entrant. All this M&A talk seems to have actually boosted Telstra’s share price, however, with distracted competitors considered to offer competitive advantage.