hi nocelery...eat your greens
...I found this on the tpg forum.
TPG, Vodafone merger of equals
August 29, 2018
TPG Telecom and Vodafone Hutchison Australia are set to unveil plans for a merger of equals today in a scrip deal that will create a telecommunications giant worth at least $10 billion.
A market announcement this morning will reveal details of the deal, with the merged entity to be 50.1 per cent-owned by Vodafone Hutchison Australia, while TPG Telecom’s stake will be 49.9 per cent.
TPG Telecom’s chief executive David Teoh will emerge as chairman of the newly merged entity while Vodafone Hutchison Australia’s current boss, Inaki Berroeta, will be the chief executive.
The combined company will be similar in size to the nation’s second-biggest telco, Optus, in terms of market share.
The move comes after TPG confirmed on August 22 a report in The Australian’s DataRoom that it was in discussions with Vodafone Hutchison Australia about a merger of equals, sending shares in the Australian-listed TPG soaring as investors strongly backed the deal.
TPG Telecom’s share price closed yesterday up 28c to $7.88. In the past week the shares have climbed 21 per cent.
TPG’s current market capitalisation is $7.05bn.
While a possible merger between the two telcos has been mooted for some time, last week’s confirmation was the first time both companies acknowledged their discussions.
It is understood that the combined group will have $4bn worth of net debt, which equates to a ratio of 2.2 times net debt to pro-forma earnings before interest, tax, depreciation and amortisation for the 2018 financial year of $1.85bn.
The deal will not involve an equity raising by TPG and will not include Vodafone New Zealand. However, it is understood that as part of the deal, Vodafone Hutchison Australia will demerge its Singapore mobile operation.
Macquarie Capital is working for TPG, while Deutsche Bank and Bank of America Merrill Lynch is advising Vodafone Hutchison Australia.
The deal is said to have been a long time coming, with discussions emerging in 2015 about a transaction.
Compelling synergies are said to exist between the companies. With a mobile customer base of six million, Vodafone is looking to finally make a mark in the fixed line market, especially as a reseller of National Broadband Network services to homes.
Meanwhile, TPG Telecom has invested over $1bn in acquiring mobile spectrum and is looking to spend an additional $600m to roll out its metro-focused mobile network.
TPG’s mobile play is built on combining its significant fixed fibre assets with the mobile infrastructure.
The merged telco business will now provide a strong competitor to Telstra and Optus, with compelling offerings in both the mobile and fixed-line markets and substantial cross-selling opportunities to TPG’s large broadband subscriber base and Vodafone’s mobile customers.
Around September 2015, Vodafone Australia and TPG struck an operational partnership.
Early indications from TPG suggest that the telco will be looking to push a discount offer in the market as it seeks to build up its mobile market share.
In May, TPG launched a trial plan offering free service for the first six months that would then cost $9.99 a month. The first 1GB of data each day will be supplied at 4G LTE speeds but the speed will then be capped at 1 megabit a second for the rest of the day.
The big fear for the existing operators is that TPG’s pricing will force all of them to restructure their offers, further increasing margin pressures.
However a merged TPG-Vodafone would be more circumspect on prices, analysts say.
Meanwhile, a tie-up is expected to force the federal government to rethink the upcoming 5G spectrum auction.
The government is already on track to make less than the $1bn it was expected to pick up from the auction, with the reserve price for the full 350 lots of 5G spectrum set at about $185m.
(20min delay)
