Vodafone Group PLC and CK Hutchison Holdings Ltd (長和集團) are considering combining their unprofitable mobile-phone business in Australia with local broadband provider TPG Telecom Ltd as intensifying competition forces rivals to consolidate.
Vodafone Hutchison Australia Pty and TPG Telecom Ltd are in “exploratory” discussions about a deal, they said in separate statements yesterday.
TPG described it as a “merger of equals.”
As competition intensified and handset costs rose, Vodafone Hutchison’s loss widened to A$92.3 million (US$67.7 million) in the six months ended June from A$81.5 million a year earlier, according to Hutchison Telecommunications (Australia) Ltd filings.
Average revenue per user at the joint venture fell 1.3 percent.
The venture has a troubled history in Australia. It has struggled to lose its nickname “Vodafail” — after its network gained a reputation for patchy coverage and dropped calls.
The tie-up would unite TPG, best known in Australia for its fixed-line broadband services, with Vodafone Hutchison’s almost 6 million mobile customers in the nation.
Should the combined entity be listed in Australia, a transaction would shed more clarity on the valuation of Vodafone Hutchison.
That might help either party exit the venture after years of speculation that UK-based based mobile giant Vodafone was looking for a buyer for its stake.
TPG shares yesterday soared 22 percent to A$7.65 in Sydney, expanding its market capitalization to A$7.1 billion. Vodafone shares rose 0.2 percent to ￡1.7644 at 8:04am in London.
It is not clear how any so-called merger of equals would be structured financially, but one ownership structure being considered would see TPG with 50 percent of the combined entity and Vodafone and Hutchison with a 25 percent stake each, a person familiar with the talks said.
There is no certainty of a transaction or what the terms might be, TPG said in its statement.
TPG last year said it would build a mobile network to challenge Australian operators, including Vodafone, and spent A$1.26 billion on airwaves.
It said at the time that it would spend an additional A$600 million over three years rolling out a network to cover 80 percent of the Australian population.
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