The Australian Competition and Consumer Commission released an issues paper on the proposed merger late last night, calling for the mobile telecommunications industry to respond to its concerns.
"The ACCC's preliminary view is that the proposed merger raises competition concerns in the short to medium term," the paper says.
While the issues paper does not represent the regulator's final view, it clearly indicates the ACCC is uncomfortable with the merger.
The regulator's prime concern is that Vodafone and Hutchison are each other's direct competitors in that they both focus their services on "price-sensitive customers in metropolitan areas."
"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," 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."
Telstra, Optus and a combined VHA would command a 95 per cent share of the mobile telephony market.
The ACCC is concerned the merger will result in "increased concentration" of major mobile carriers and that the proposed entity's reseller partners would be "unlikely to constrain the merged entity."
The regulator is also concerned that existing network sharing and joint venture relationships between a merged VHA, Telstra and Optus could lead to price collusion or some other form of anti-competitive behaviour.
The ACCC does not, however, take issue with the amount of combined mobile spectrum a merged VHA might hold.
"The ACCC considers that a substantial lessening of competition is unlikely to arise in relation to the aggregation of spectrum."
Submissions to the Statement of Issues are welcome until April 17, 2009.
The ACCC expects to make a final decision by May 6.