Australia Court Approves $10 Billion Vodafone Group Plc – TPG Telecom Merger

An Australian court has approved the merger between internet provider TPG Telecom and a unit of Britain’s Vodafone Group Plc (LON: VOD) in its judgement on 13th February 2020. This judge rejected one regulator’s appeal and ushered in a formidable competition to the country’s leading telecommunications companies. The merger is valued at around US$10.1 billion (A$15 billion).

The Magistrate of the state court stated that a merger between Vodafone’s joint venture with Telco Hutchison Telecommunications (Australia) Ltd and TPG would not reduce competition. The court then disallowed the Australian Competition & Consumer Commission’s justification for blocking the deal last year, i.e. in the year 2019.

The federal court judgment gives rise to a plan to meet up to the supremacy of Singapore Telecommunications’ Optus and Telstra Corp Ltd in the Australian market by providing Vodafone Group Plc and TPG a way to gain access to each other’s substantial countrywide networks. However, the Australian Competition & Consumer Commission has one month to appeal against the decision.

As per media report, Vodafone Hutchison Australia Chief Executive Officer, Inaki Berroeta stated that this tie-up creates a lot of additional assurances that there will be a solid 5G participant in the market. He said that that the company has indications that there will be three major 5G operators in the Australian market.

As per media report, Inaki Berroeta further stated in his comment that tie-up with TPG will grow the company’s network capability and accelerate the planned rollout of a high-speed 5G network. He also said that the more swiftly the merger can proceed, the quicker Vodafone Group Plc could provide healthier competitive results for Australian businesses and customers.

David Teoh, TPG’s Executive Chairman and founder, stated that the company is satisfied with the decision of the Federal Court. The transaction still requires investor approval and other regulatory authorisations.

TPG had been searching for options for an entry into the eagerly awaited 5G mobile telephony market where Vodafone is drawing up plans to augment the competition after stoppage of construction of its network. This was the result of an Australian ban on parts delivered by China’s Huawei Industries.

The decision is a setback to the Australian Competition & Consumer Commission which had in the past awarded decisions to stall some of the country’s largest Mergers & Acquisitions.

Rod Sims, Australian Competition & Consumer Commission’s Chairman, stated that Australian customers have missed the chance of experiencing stronger competition, which often comes with low-cost mobile telecommunication services as a result of the above merger being permitted to be in effect by the court.

VOD – Overview of Vodafone Group Plc

The Vodafone Group Plc (LON: VOD) is one of prominent telecommunication and mobile communication service providers in the world. The company operates in twenty-six countries and collaboration with network providers in over 55 more countries. Around the world, the company has nearly 0.44 billion users, including 19.5 million in the United Kingdom. On 1st January 1985, the company facilitated the first-ever mobile phone call from London to its Newbury Headquarters. The company now has more than 13,000 employees throughout the United Kingdom.

 VOD – Trading Updates

On 5th February 2020, Vodafone Group Plc declared its trading update for the quarter ended 31st December 2019.

The Service Revenue from the United Kingdom increased to €1,282 million for the quarter ending 31st December 2019 as compared to the €1,235 million for the quarter ending 31st December 2018. The Service Revenue from Germany increased to €2,883 million for the quarter ending 31st December 2019 as compared to the €2,301 million for the quarter ending 31st December 2018. The Service Revenue from other Europe increased to €1,265 million for the quarter ending 31st December 2019 as compared to the €1,119 million for the quarter ending 31st December 2018.

In contrast, the Service Revenue from Italy decreased to €1,220 million for the quarter ending 31st December 2019 as compared to the €1,284 million for the quarter ending 31st December 2018. The Service Revenue from Spain decreased to €966 million for the quarter ending 31st December 2019 as compared to the €1,039 million for the quarter ending 31st December 2018. The Service Revenue from the rest of the world decreased to €2,053 million for the quarter ending 31st December 2019 as compared to the €2,105 million for the quarter ending 31st December 2018.

The mobile contract churn of Europe decreased year-on-year for a fifth consecutive quarter, supporting the net additions of 0.5 million mobile contracts. Additionally, there were net additions of over 0.4 million NGN broadband in Europe. Vodafone is the first company in Europe to bring in ultra-low latency mobile edge computing from Amazon Web Services available over 5G networks.

The company had 21.0 million NGN users, 22.0 million TV users in Europe, 24.7 million fixed broadband users and 7.0 million converged users at the end of the period.

 VOD – Stock Price Performance

On 13th February 2020, at around 09:09 AM (GMT), the stock of Vodafone Group Plc was trading at a price of GBX 151.10 per share on the London Stock Exchange, a decline in the value of around 1 per cent or GBX 1.54 per share, as opposed to the closing price of the stock on the previous trading day, which has been reported to be at GBX 152.64 per share.

At the time of writing, the market capitalisation of Vodafone Group Plc was £40.86 billion with regards to the current market price of the stock. The free float and outstanding shares of Vodafone Group Plc were reported at 26.68 billion and 26.77 billion, respectively.

The share price of Vodafone Group Plc recorded at GBX 169.46 as on 12th November 2019 was its 1-year peak price, whereas the share price recorded at GBX 122.22 as on 20th May 2019 was the 1-year low share price. The current share price was lower by 10.8 per cent from the 1-year high price, whereas the current share price was higher by 23.6 per cent from the 1-year low price.

The beta of the stock has been reported at a value of 1.10, representing the fact that the share price of the company is higher in terms of volatility as compared with the movement in the comparative benchmark index.