StockMarketWire.com - Australia-listed TPG Telecom and Vodafone Hutchinson Australia have agreed to merge to create a new fully integrated telecoms company worth $11bn, accelerating the benefits of the substantial network investments made by both firms.

With the merger due to complete in 2019, the new company would be a "more powerful challenger" to its competitors Telstra and Optus, with an integrated fixed and mobile offering. It would also be better able to invest in next-generation mobile and fixed networks and drive innovation, service and product improvements to benefit Australian telecoms customers.

Vodafone and Hutchinson Telecommunications Australia Limited would each own an economic interest of 25.05% in the new company, with TPG shareholders owning the remaining 49.9%.

The Board of MergeCo would comprise: David Teoh, as Chairman (currently CEO and Chairman of TPG), Inaki Berroeta as Managing Director and CEO (current CEO of VHA), existing TPG directors Robert Millner and Shane Teoh, two nominees of Vodafone, two nominees of HTAL, and two new independent directors.

The new company would be listed on the Australian Securities Exchange and called TPG Telecom Limited. There were no changes currently planned to any of the existing brands of either VHA or TPG.

The merger was expected to generate substantial cost synergies from the combination of two complementary networks, rationalisation of duplicated costs and economies of scale. Additionally, the combined entity would benefit from revenue synergies through cross-selling of products across both VHA and TPG's corporate and consumer customer bases.

In parallel to the merger agreement, TPG and VHA have signed a separate Joint Venture Agreement to acquire, hold and licence 3.6 GHz spectrum. The government was auctioning 125 MHz of 3.6 GHz band spectrum, with the auction expected to commence in late November 2018. The joint venture would register as a participant in the auction.

The parties would also negotiate with the aim of expanding the business of the joint venture in future, including to acquire future spectrum licenses and/or facilitate various forms of efficient spectrum and network sharing including a shared 5G Radio Access Network. The Joint Venture Agreement was ongoing, and would not terminate if the merger fails to proceed.





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