Vodafone seals £8.4bn deal to merge Australian business

Vodafone has agreed a mammoth 15 billion Australian dollar (£8.4 billion) deal to merge its Australian operations with TPG Telecom.

The mobile phone giant said the tie-up of Vodafone Hutchison Australia and TPG Telecom will create a “more powerful challenger to Telstra and Optus in Australia”.

Vodafone Australia, owned by Hong Kong-based CK Hutchison and Vodafone Group, will have a majority 50.1% stake in the merged group.

TPG will hold the remaining 49.9% stake in the group, which will be called TPG Telecom Limited and listed on the Australian Securities Exchange.

There are no plans to rename the existing VHA or TPG brands.

The firms said the merger is expected to generate “substantial” cost savings as they plan to cut out duplicated costs and use their economies of scale.

The new group will have combined revenues of more than six billion Australian dollars (£3.4 billion) and underlying earnings of more than 1.8 billion Australian dollars (£1 billion).

Nick Read, chief executive designate of Vodafone, said: “This transaction accelerates Vodafone’s converged communications strategy in Australia and is consistent with our proactive approach to enhance the value of our portfolio of businesses.

“The combined listed company will be a more capable challenger to Telstra and Optus, and will be much better placed to invest in next-generation mobile and fixed-line services to benefit Australian consumers and businesses.”

It is expected the merger will complete in 2019, subject to regulatory and shareholder approval.

Shares were trading 2% lower after the announcement.

The combined group will be headed by TPG boss David Teoh as chairman, with VHA chief executive Inaki Berroeta as managing director and chief executive.

The deal comes as Vodafone is also merging its Indian operations with Idea Cellular, which will help it weather the tough conditions in the market.