Voda/Hutch merger rattles ACCC

Australia's competition watchdog tonight issued a strongly worded statement of concern that the proposed merger of mobile carriers Hutchison and Vodafone could lead to increased retail prices on mobile telephony and broadband services.

The ACCC's preliminary view is that the proposed merger may increase the potential for Vodafone to exercise unilateral market power

ACCC statement

In February the pair announced plans to merge in a joint venture dubbed VHA that would have around 6 million customers and combined revenues of approximately $4 billion for the 12 months ended 30 June 2008. The merger is subject to a shareholder vote and is the subject of a current ACCC inquiry.

"The ACCC is concerned that the removal of Hutchison as a vigorous and effective competitor will lead to increased prices for customers in the retail mobile telephony and [mobile broadband] services segments in the retail mobile telecommunications services markets," the regulator said in a statement tonight.

"The ACCC's preliminary view is that the proposed merger may increase the potential for Vodafone to exercise unilateral market power," it added, noting its belief that Hutchison and Vodafone were each other's closest competitors, focusing on price-sensitive customers in metropolitan areas.

Furthermore, the regulator noted it was concerned that the possibility for new entrants into the mobile market to provide a competitive constraint on the proposed three players, VHA, Telstra and Optus was "practically non-existant".

Another concern was that VHA would have an increased ability to observe plans by Telstra and Optus to invest in their networks courtesy of it being party to network sharing arrangements with both Telstra (through the Telstra/Hutchison joint 3G network) and Optus (through the Vodafone/Optus joint 3G network).

The ACCC said it would take submissions from the telecommunications industry on the merger until 17 April and would announce its own final view on the situation by 6 May.