Ann: TPG welcomes Federal Court decision regarding merger, page-2

A scathing writeup in the SMH on the ACCC's inability to take into account economic realities.

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Only the ACCC would even try to argue that if the merger were blocked, TPG might, at some future but not-too-distant date, change its mind and reactivate the plan to build its own network.It has been apparent to everyone but the ACCC that, as TPG chief executive David Teoh argued, without Huawei and the capacity to upgrade a 4G network to 5G cheaply TPG wouldn’t have the financial capacity to build a network that could compete with Vodafone, Telstra and Optus.

The ACCC might have preferred the industry to be different. It might prefer four mobile players, or five or perhaps even a dozen to a three-carrier market – even if all the players were losing money. This is not a large market.

Vodafone, TPG and the Federal Court, however, live in the real world and have to deal with real markets and market structures, not some imagined perfect industry landscape. As the judge said, it is not for the ACCC or the court to engineer competitive outcomes.Vodafone, despite more than $8 billion of investment in this market, has not turned a profit here in its history.ACCC chairman Rod Sims is standing by the decision to oppose the merger.ACCC chairman Rod Sims is standing by the decision to oppose the merger.

CREDIT:LOUIE DOUVISTPG was once highly successful but the NBN and the squeeze it has placed on fixed line businesses is steadily squeezing its margins and undermining its financial stability as the national broadband network nears completion.If not for the ban on Huawei it might have built a relatively modest network with, relative to 5G services, limited capabilities and perhaps been able to upgrade it at some much later date.

Huawei’s technology is significantly cheaper and more advanced than other suppliers.The nature and scale of the proposed network and of TPG’s balance sheet, however, always meant it would be, at best, a niche player. As Justice Middleton indicated, however, once the moment (and Huawei) was lost, there was no going back for TPG's David Teoh.

The ACCC should have put greater weight on the counter-factual to its own position – the benefits to competition from Vodafone and TPG merging.Put the two businesses together and a feisty but weaker competitor to Telstra and Optus is brought next to TPG’s large fixed line customer base within a much bigger balance sheet and alongside TPG’s $1.3 billion hoard of spectrum.