The M2 and Vocus merger announced yesterday has thrown the...

The M2 and Vocus merger announced yesterday has thrown the spotlight back on future predictions for TPG Telecom and Vodafone.
Vodafone has been speculated as being within TPG’s sights for some time.
However, certain sources are now of the belief that its founding executive chairman, David Teoh, was in Britain last week trying to convince Vodafone UK to sell its 50 per cent interest in its Australian subsidiary to the IT entrepreneur.
Both Vodafone and TPG did not comment yesterday.
While half of Vodafone Australia is owned by its British parent, the remainder is controlled by Hutchison Telecommunications Australia, a subsidiary of CK Hutchison Holdings, which many believe is a seller.
CK Hutchinson sits within the empire of Li Ka Shing’s Cheung Kong Holdings and there is speculation that the Hong Kong billionaire is interested in divesting various components of his global empire, including some assets in China.
IT industry analysts have suspected that TPG would make a play for Vodafone because strong synergies exist between Vodafone’s telecommunication towers and the fibre networks of TPG and its recently acquired iiNet.
A merger between the two would create 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.
Some estimate that an acquisition of Vodafone could cost TPG about $4 billion, just under half its own market value.
Mr Teoh could pay for the company via scrip, although TPG would probably have to pay down loans on its recent $1.56bn iiNet transaction before embarking on an acquisition that is debt-funded.
The IT sector is currently under the spotlight for M&A activity after news yesterday emerged that Vocus and M2 would embark on a $3bn merger, a tie-up that this column back in May tipped was on the cards.
Goldman Sachs banker Joe Fayyad worked for M2 on the deal, while Dan Janes from the Credit Suisse Emerging Companies division acted for Vocus. It is understood that plans for the deal started to progress around July.
Elsewhere, there was persisting speculation yesterday that one of the lenders within the Arrium syndicate could be offloading a major parcel of debt in the mining services business on the secondary market. The company is currently facing the challenge of reducing its debt pile, believed to be worth $1.7bn.
However, Arrium said it had not breached any of its loan covenants.