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TPG and Vodafone announce merger

TPG and Vodafone announce merger

"Together TPG and Vodafone 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".

There will be no quick escape from Australia for Vodafone Group Plc.

Vodafone will have net debt of about $1.9 billion after a restructure of its debt facilities after the merger is approved.

The entry of TPG to Australia's mobile market will "invigorate" and "stimulate" competition, according to Vodafone. Instead of quitting Australia, where Vodafone has battled to overcome a reputation for a patchy network, the agreement prolongs its commitment to the country.

"The combination of the two companies will create an organisation with the necessary scale, breadth and financial strength for the future", Berroeta said. TPG Chairman David Teoh has also agreed to a 24 month escrow in MergeCo following implementation of the Scheme.

The "merger of equals transaction" is how the shares have been divvied up - Vodafone shareholders will own 50.1% of the shares in the new company, and the rest 49.9% will be held by TPG shareholders.

Mr Berroeta will be chief executive of the merged business, while Teoh will be chairman.

At 0200 AEST on Thursday, Hutchison shares had jumped 48 percent taking them to 0.18 Australian dollars (0.13 US dollars) per share, while TPG bounced 15.04 percent to 9.06 Australian dollars (6.60 USA dollars) per share.

The Australian share market has already seen positive change on Thursday, with S&P/ASX200 indices up 0.2% boosted by telecom stocks. TPG will also separate its Singapore mobile business TPG Singapore. Vodafone fell 1.9% to 169.72 pence at 10:53 a.m.in London.

The merged company - to be called TPG Telecom Limited - will have a combined value of about $15 billion and annual revenue of $6 billion.

Despite speculation in recent years that Vodafone would look to exit Australia completely, as CEO Vittorio Colao shifts the carrier's focus to Europe, the high levels of debt accumulated from years of weak performance constrained its options.

TPG directors have recommended shareholders vote in favour of the deal, if there is no superior proposal. Leverage does not include the 700 MHz spectrum payments due in January 2020 of A$80m and A$352m for VHA and TPG respectively, nor any working capital adjustments that may be required.

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