TPG-VHA Merger to Lower Cost of Network Investment and Speed Up 5G Rollout, says GlobalData

TPG-VHA Merger to Lower Cost of Network Investment and Speed Up 5G Rollout, says GlobalData Image Credit: Vodafone

Following the announcement of the merger between TPG Telecom and Vodafone Hutchison Australia (VHA), Siow Meng Soh, Technology Analyst at GlobalData says 

the tie-up will benefit the two companies in terms of cost avoidance in network investment and speed up 5G rollout.

“With the 5G spectrum auction around the corner, TPG will need to inject more cash to obtain 3.6GHz spectrum while it does not yet have paying customers on its mobile network. Moreover, joining forces with VHA gives TPG greater bargaining power with a smaller number of 5G equipment suppliers; after the ban on Huawei and ZTE to supply 5G by the Australian Federal Government. From VHA’s perspective, it needs to start planning and implementing 5G to avoid lagging too far behind Telstra and Optus. VHA’s 5,000 mobile sites and TPG’s fixed assets (27,000 km+) for backhaul will enable the merged entity to accelerate 5G implementation.”

The combined company will also have greater economies of scale and bargaining power with suppliers, says Siow. "TPG will get instant access to a nationwide mobile network to offer customers competitive fixed-mobile bundled services. VHA gets access to enterprise accounts, exposure to more SMBs and a solid fixed network infrastructure (better margin than buying wholesale NBN services).”

"However, there are several challenges for the merged entity. TPG’s current management emphasizes on keeping the organization lean and compete on price while Vodafone is more about delivering solutions with greater business value on top of connectivity. VHA focuses on customer service and has 350 consultants to support business customers across its retail stores, and an account manager for businesses with 10 or more connections. TPG on the other hand, treats business customers the same as consumers and relies mostly on online channel, telephone sales and dealers.”

"After the merger, Vodafone Group’s ownership will be lowered to 25.05% which throws into question the amount of influence the new entity and how much support it will offer going forward."

“In particular the Internet of Things (IoT) business requires strong support from Vodafone and TPG’s enterprise sales team are not equipped to sell IoT solutions. The new entity will receive the have majority of its revenue from consumer and SMB, with the enterprise segment contributing less than 15%. In the short-term, the merger could see the new entity focusing more on consumer and SMB, less on enterprise and government."

"Lastly, the merger is subject to regulatory approval as a standard procedure but this deal will attract greater scrutiny from the ACCC due to the impact on competition. Meanwhile, the announcement has brought some relief to the market since the merged company is unlikely to pursue an aggressive pricing strategy that will bring down ARPU. With the merger, TPG no longer needs to undercut competitors to gain market share and build scale.” 

Ray is a news editor at The Fast Mode, bringing with him more than 10 years of experience in the wireless industry.

For tips and feedback, email Ray at ray.sharma(at), or reach him on LinkedIn @raysharma10, Facebook @1RaySharma


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