Federal Court Justice John Middleton said today that the multibillion-dollar merger would not “substantially lessen competition” in the market.

TPG Telecom Limited (TPG) and Vodafone will be enabled to become one company, merging their dominant market shares in fixed line broadband and mobile, respectively, to put up a challenge to Telstra and Optus.

“It is extremely unlikely and there is no real chance that TPG will roll out a retail mobile network or become an effective fourth mobile network operator in the relevant future,” Justice Middleton said in the ruling.

According to Mr Middleton, Vodafone was also facing its own challenges competing against Telstra and Optus, both of which have fixed mobile network services, so the “rational and business-like solution” is for Vodafone and TPG to merge.

The ACCC was opposed to the merger because it believed TPG would build its own network. 

In May last year, Australia’s consumer watchdog opposed a merger between the telecommunications companies because it would discourage competition in the mobile market.

ACCC chair Rod Sims said the decision is a loss for customers, who could face higher prices.

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“Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed,” Mr Sims said.

The decision from the ACCC to block the merger was largely based on the knowledge that, potentially, TPG would go ahead and build a fourth mobile phone network in Australia anyway if they were prevented from merging.

“The ACCC’s concern was that with this merger, mobile data prices will be higher than they would be otherwise. These concerns were reinforced by statements from the industry welcoming the merger and the consequent ‘rational’ pricing,” Mr Sims said.

More competition and decreased prices for consumers were at stake in the view of the ACCC.

However, the Australian Communications Consumer Action Network (ACCAN) argued for the merger, stating the high cost of entry into the mobile market meant it was unlikely there would be any new entrants.

“Without a strong and sustainable third mobile network operator, Telstra and Optus will have the opportunity and incentive to compete less vigorously for customers,” ACCAN said in its October 2018 submission to the ACCC.

Vodafone has welcomed the ruling and said the merger should be completed in mid-2020, subject to remaining approvals and any appeal by the ACCC.

Fiona Crosbie, Allens’ chairman and lead partner for VHA on the case, said the decision was keenly awaited.

“We were so pleased to assist longstanding client VHA to secure the court’s blessing for what will be a transformative merger for the company and for the Australian telecommunications sector,” Ms Crosbie said. “We enjoyed working seamlessly with the VHA team to secure this expedited decision.”

Competition partner Liza Carver, from Herbert Smith Freehills who advised TPG, said they were very pleased with the outcome.

Ms Carver said: “The judgment demonstrates the Federal Court’s ability to hear and determine complex merger cases, and do so in an expeditious manner, and the court did a great job in this instance. The evidence was extensive and complex relating to financial, technological commercial matters. The ability of parties to go to the Federal Court to resolve these matters is important, without resolution of ACCC concerns there can be a complete impediment to a transaction taking place.”

This new merged entity will be telecommunications companies in Australia, ahead of Optus in fixed line customers, with TPG owning other large ISPs which include iiNet, Internode, AAPT, TransACT and Pipe.

Under the terms of the deal, current Vodafone boss Inaki Berroeta will lead the merged group, with TPG founder and CEO David Teoh filling the role of non-executive chairman. The rest of the executive structure for the merged group was not announced.