Challenger carriers TPG and Vodafone Australia (VHA) have agreed on terms to merge the two brands to create a fully integrated mobile and fixed line telco estimated to be worth $15 billion.
The two companies this morning announced they had entered into a scheme implementation deed for the proposed “merger of equals” to better challenge the major incumbents.
The size of the special dividend to be paid to shareholders is still unclear and will be determined after transaction costs are calculated the parties to the deal said.
“The merger will create a more effective challenger to Telstra and Optus, with an integrated fixed and mobile offering and a pro forma enterprise value of approximately $15 billion,” TPG said in a statement.
The two telcos will combine as “TPG Telecom Limited”, pending approval for the deal by the Australian Competition and Consumer Commission (ACCC).
The merger would bring together the more than 27,000km of fibre networks and 500 mobile sites owned by the pair across Australia, making it one of Australia's largest full-service telcos.
It would also consists of more than 6 million mobile subscribers and 1.9 million fixed line broadband customers, however there are currently no plans to change either of the existing brands.
The merged company is expected to be valued at approximately $15 billion, with revenues of more than $6 billion.
Vodafone Australia will have the majority stake in the new company, commanding 50.1 percent ownership of the ASX-listed group compared with TPG’s 49.9 percent.
TPG CEO David Teoh will become the Chairman of the merged group, while VHA CEO Iñaki Berroeta will become managing director and CEO.
Teoh said the merger was "an exciting step-change in TPG's evolution" that would allow the pair to "be a more formidable competitor against Telstra and Optus".
"Together we will become a more effective industry challenger that strives to create competitively-priced consumer products with the high levels of customer service that differentiates us in the market," he said.
Berroeta said VHA was joining with TPG "from a position of strength and momentum", but that together the telcos would be more competitive and offer more choice.
"The combination of our two highly complementary businesses and talented employees will create a more sustainable company, with enhanced capacity to invest in new technology and innovation," she said.
The merger is expected result in “substantial cost synergies” and allow the companies to maximise opportunities to invest in 5G technology.
“The combination of these assets will maximise the opportunities presented by convergence and best position to combined company to invest in 5G technologies that will deliver faster services and offer more competitive value propositions to more Australian customers," TPG said.
The two have also formed a joint venture to bid for Spectrum in Australia. TPG’s Singapore operations are not impacted by the merger.
More to come