TPG Telecom to merge with Vodafone Australia

TPG Telecom to merge with Vodafone Australia

TPG Telecom to merge with Vodafone Australia

The combined company will be 49.9% owned by TPG shareholders, with shareholders of Vodafone Australia's holding company Vodafone Hutchison Australia will own 50.1%.

Shares in TPG were up $1.28, or 16.2 per cent to $9.16 at 11.55am, while shares in Hutchison Telecom Australia - as Vodafone Australia is known - surged 45.6 per cent to 18.2¢ each.

The merger is expected to generate substantial cost synergies from the combination of two complementary networks, rationalisation of duplicated costs and economies of scale.

Of the predicted $6 billion annual revenue, Vodafone will contribute $3.57 billion (and earnings just over $1 billion) and TPG $2.5 billion ($839 million earnings). David Teoh, who is now the CEO and chairman of TPG, will become the new group's chairman.

"Together TPG and [Vodafone Hutchison Australia] will have a comprehensive portfolio of fixed and mobile products, and will own the infrastructure required to deliver faster services and more competitive value propositions to Australian customers", David Teoh, chairman of TPG, said. The new entity will be worth as much as A$10.9 billion, the companies said. The Board of TPG also indicated to distribute a fully franked cash special dividend to TPG shareholders prior to completion of the merger.

TPG and Vodafone Hutchison Australia have announced that they will proceed with their merger to form a telecommunications giant that they say will have an enterprise value of approximately AU$15 billion.

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An announcement from the two telcos said that VHA expected to have net debt $1.94 billion (plus an $80 million spectrum instalment at the end of January) following a restructure its existing debt facilities by its owners, Vodafone and Hutchison.

The scope of the joint venture is to acquire, hold and licence 3.6 GHz spectrum. The joint venture will register as a participant in the auction.

TPG said it would pay a special dividend to shareholders prior to completing the merger, assuming its debt remains within targets.

The big winners of the merger would be Australian consumers, he added.

TPG also reported preliminary results for its full-year to July, saying these should be ahead of expectations.

"Customers can continue to use our services, upgrade or change plans, or join us as a new customer with confidence".

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