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Vodafone Australia and TPG Telecom Agree to a Merger

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Sep. 20 2018, Updated 7:30 a.m. ET

Vodafone merging Australian unit with rival

Vodafone Australia and its rival TPG Telecom have agreed to do something similar to a T-Mobile–Sprint merger in Australia. The two operators are seeking to merge in a deal valued at $8 billion. They had reportedly been exploring a merger.

Vodafone Australia is a unit of UK-based Vodafone (VOD). Vodafone co-owns Vodafone Australia with CK Hutchison Holdings.

Vodafone Australia has been struggling amid fierce competition for wireless customers in the Australian market. The business suffered a $67.6 million loss in the first half of 2018. The loss increased from $59.7 million a year ago.

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Need to speed up 5G development

Vodafone Australia and TPG are banking on the merger deal to enable them to better compete with their larger rivals. Like T-Mobile (TMUS) and Sprint (S) in the United States, Vodafone Australia and TPG have also cited an urgency to develop a 5G (fifth-generation) network as a reason for wanting to combine.

T-Mobile and Sprint have said they could put as much as $40 billion toward network investments, including building a nationwide 5G network if allowed to combine. Their larger rivals Verizon (VZ) and AT&T (T) are already underway with preparations to start offering 5G services in the coming months. Verizon is eyeing October 1 for its 5G launch in four US cities, while AT&T is aiming to launch 5G services in a dozen cities by the end of the year.

Australia 5G spectrum auction

Vodafone Australia and TPG intend to participate in the 5G spectrum auction coming up in Australia in late November.

Vodafone and its partner CK Hutchison Holdings would own 50.1% of the combined company, while TPG would own the rest.

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