Will Vodofone and 3G Merge

There have been reports that 2 huge mobile phone companies are set to merge after Hutchinson executives gave the okay for Vodafone and 3G to merge. This is in early stages yet but a joint venture will give VHA (Vodofone & Hutchinson) a 28% market share in the Australian mobile market.

Australian IT at news.com.au reports the following:AUSTRALIA’S $13 billion a year mobile phone sector is about to undergo a massive shake-up after Hutchison shareholders today gave a big thumbs-up to the proposed merger between the 3G mobile phone operator and Vodafone Australia.
Hutchison shareholders approved the proposed merger this afternoon in an extraordinary general meeting in Sydney.

The shareholder approval is the second last hurdle the two groups must overcome before Vodafone and Hutchison form the 50/50 joint venture to be known as Vodafone Hutchison Australia (VHA), which will have a combined $4 billion in annual sales and 6 million customers.

The merger will give VHA a mobile phone market share of 27 per cent, placing the new entity as a serious threat to Optus and its position as Australia’s second-largest mobile company with 33 per cent market share.

However, VHA’s position as a new competitive force in the mobile phone market could all come crumbling down if the merger fails to secure the approval of the consumer watchdog.

The last and most difficult obstacle for VHA is a seal-of-approval from the Australian Competition and Consumer Commission, which yesterday voiced a warning that the merger could raise mobile phone and wireless broadband prices.

The regulator said Hutchison has provided strong price-based competition in the mobile services market and that its removal could raise prices.

“The proposed merger may increase the potential for Vodafone to exercise unilateral market power,” the ACCC said.

But Hutchison and Vodafone remain confident in gaining the watchdog’s approval.

“The Foreign Investment Review Board and the European Commission have given their approval, and we will be responding to the Statement of Issues released by the ACCC yesterday, in particular our view that the merger will deliver more competition, more investment and a better deal for consumers,” said Canning Fok, group managing director of Hutchison Whampoa and Chairman of Hutchison Australia.

Industry and consumer groups have been asked to respond to the ACCC’s statement of issues by April 17.

The ACCC expects to release its final report by May 6.