Malone predicts further consolidation – is Vodafone next?
26 March 2015
By Graeme Philipson
Published inTelecoms & NBN
3 Comments
inShare.6
As he fights against TPG’s takeover of iiNet, the company he founded, Michael Malone has predicted that is only the first step in a wider industry consolidation, tipping that Vodafone Hutchison Australia will be next to be swallowed.
Michael Malone has very publicly stated his opposition to TPG’s takeover of iiNet, the company he founded in a garage in Perth in 1993. But he reluctantly admits the deal is likely to go ahead, He sees it as part of an inevitable industry consolidation that will leave us with “faceless” telcos who do not care as much for the customer.
“Telstra has about half the market share, so consolidation is inevitable,” said Malone, speaking yesterday at the Communications Alliance's Rewind/Fast Forward event in Sydney.
“There are Telstra, Optus and three other smaller players [TPG, iiNet and M2] who each have about 10% market share. There needs to be some consolidation there for any of them to be viable.
“At the moment the five players control 97% of the market. I predict there will be three players in a year, and there will be one who has failed.
“TPG is obviously trying to take out iiNet. If that goes ahead, as seems likely, then M2 is left as the number four player in the market. I think they are then going to find it very difficult to succeed – unless of course TPG then moves to mop up M2 and Vodafone.”
Malone is not optimistic on the likelihood of Vodafone Australia – a 50:50 joint venture between Vodafone and Hutchison – surviving. “I think Vodafone Australia has about $6 billion worth of debt. So the question is, what’s the business worth?
“I’ve seen some commentators suggest it’s worth about a $1 billion plus the assumption of the debt. That’s something TPG could manage, and [TPG CEO] David Teoh is brave enough to actually attempt something like that.
But it will all come at a cost, says Malone. “I’m sad about that what is left now is faceless. What does Telstra stand for? It is safe. What does TPG stand for? It is purple and cheap, but is very clear what it stands for.
“What the hell does Optus stand for? This industry has been let down by a number two player whose best legacy in this entire industry is the existence of TPG and iiNet. They need to stand up – and I think they are under head Allen Lew. {Optus is] undeveloped, so I think we may see a change in this marketplace coming soon.
"Is TPG brave enough to buy out Vodafone? Will the market support them? Absolutely. I think over the next year is we're going to find three consolidated players that are going to be mobile and fixed. And if that doesn't happen in this market, then Telstra will win, and it's going to be game over. There can’t be a mobile player that doesn’t have a fixed line play as well, so something is going to happen.
“Who is left now? I left iiNet a year ago. I’m not being bitter about this, but we stood up for something. We said we would fight for customers and stand up against copyright holders.
“Who is left? This industry has become faceless and I think that is a shame. The cost of consolidation has been a complete loss of personality, differentiation and quality in this industry.”
HTA Price at posting:
6.9¢ Sentiment: Buy Disclosure: Held
