Vodafone and 3 flag “economies of scale” from merger

The carriers today unveiled plans to merge their telecommunications businesses to create a company called VHA Australia.

VHA will market its products and services under the Vodafone brand but retain exclusive rights to use the 3 brand in Australia "during a transition period and thereafter", the companies said in a statement.

The VHA network will cover "at least" 95 percent of the population, they said.

About 63 percent of people will have access to 3G services immediately but additional network rollouts will take that figure up to 95 percent. No guidance on timelines was provided.

The companies flagged the potential for job cuts across operations.

"Economies of scale across procurement, product development, IT, network, commercial operations and administrative expenses are expected to deliver significant cost savings," they said.

If the merger is approved, Vodafone said it will receive a deferred payment of $500 million from VHA "to equalise the value difference between the respective businesses".

Vodafone said it will also receive an "annual brand licensing fee" from VHA equivalent to one percent of service revenues.

The transaction is expected to close by the middle of the year subject to shareholder and regulatory approvals and other due diligence processes.