ACCC pours cold water on the Telcos
Stock
TPG Telecom (ASX: TPM) $6.54 as at 13/12/2018
Hutchinson Australia (ASX: HTA) $0.10 as at 13/12/2018
Telstra (ASX: TLS) $2.93 as at 13/12/2018
Event
The telcos are struggling today after the Australian Competition and Consumer Commission (ACCC) put the TPG (ASX: TPM) – Vodafone Australia (50% owned by Hutchinson Telecommunications (ASX: HTA)) merger deal on notice.
TPG Telecom (ASX: TPM) Chart
We discussed the merger back in August, at the time saying “consolidation in the sector is now on in a big way and it is likely other companies will be running the ruler through both competitors and complimentary businesses … would be less aggressive on pricing than a standalone TPG offering – chairman David Teoh had been very vocal about his aggressive pricing plans.”
Clearly some comments there would raise concerns within the ACCC and today those concerns were pushed by the Chairman Rod Sims saying “Our preliminary view is the merged TPG-Vodafone would not have the incentive to operate in the same way, and competition in the market would be reduced as a result.”
The ACCC also showed concerns with the combined group’s fixed line and broadband businesses, as well as its impact on innovation in the sector.
Hutchinson Australia (ASX: HTA) Chart
Both TPG and Hutchinson Australia have taken big hits today, but both still trade above their pre-merger announcement prices, showing the market believes the deal will likely eventuate, even if there has to be some concessions.
Telstra has also been caught in the cross hairs. It bounced aggressively in August when the deal was announced as the market factored in lower competition, but trades lower today following the news.
Telstra (ASX: TLS) Chart
Market Matters Take/Outlook
