The Australian Competition and Consumer Commission is looming as a stumbling block for the proposed merger between telecommunications groups Vodafone and Hutchison, reportedly demanding more information from the two groups.
The ACCC wants to be sure that the customers of both companies will not be at a disadvantage if the proposed $6 billion merger goes ahead.
According to The Australian Financial Review, an industry insider has claimed that the two companies have been asked to supply more information on their pricing histories and industry competition.
“The ACCC seem to have taken the view that Vodafone and Hutchison are close competitors at the low end of the market,” the insider said.
“You would think they would look very closely at this because it might not be the kind of consolidation they wanted – for instance, it takes out the opportunity for a fixed-line player to acquire Hutchison, which they might see as a better outcome for customers.”
The proposed merger would put the companies under a new entity titled VHA, which would have 5.9 million customers and 27.3% of the market. Hutchison’s “3” brand would be eventually eliminated under the new entity, and all customers will be placed under the “Vodafone” brand.
But the ACCC has already signalled that it intends to put pressure on the two companies before any merger goes ahead to ensure the industry will maintain price competitiveness.
The ACCC released a statement of issues about the merger on 1 April in which it asked for submissions about the merger by 17 April. The watchdog then raised concerns about what effects the merger would have on the market.
“The ACCC’s preliminary view is that the proposed merger raises competition concerns in the short to medium term,” the paper says. “The ACCC is concerned that the removal of Hutchison as a vigorous and effective competitor will lead to increased prices for customers.”
The main concern is that if the merger goes ahead, the low prices introduced by Hutchison will disappear and mobile costs will eventually increase.
“Hutchison has competed aggressively for market share in the national market for supply of retail mobile telecommunications services, consistently attracting a relatively high proportion of customers from the other three mobile network operators.”
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Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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