Mobile carriers Vodafone, 3 to merge

David Braue
9 February, 2009
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Australia’s mobile telecommunications market will change dramatically after Vodafone Australia Limited and Hutchison 3G Australia Pty Limited this morning announced they would merge their operations into a new business called VHA.

Hutchison 3G Australia, a subsidiary of worldwide company Hutchison Whampoa Limited, operates the 3 brand. Under the terms of the agreement, VHA will market its products and services under the Vodafone brand, but will retain the rights to use Hutchison’s 3 brand during a transition period.

Combining the operations of Australia’s number-three and number-four mobile operators will significantly shift the competitive landscape, with VHA combining two nationwide 3G networks to produce a mobile infrastructure that Vodafone chief executive Vittorio Colao said would eventually service around 95% of Australia’s population.

That figure would strengthen VHA’s ability to compete against Telstra and Optus, which have both worked aggressively to expand their network footprints in recent years. Initially, VHA’s networks will reach 95% of Australians using GSM roaming, but only 63% of VHA’s customers will have access to 3G services.

“Customers can look forward to a wider portfolio of voice and data services, delivered under the Vodafone brand over a high quality network, which through ongoing investment will bring 3G coverage to around 95% of the population,” Colao said in a statement.

As a merged entity, VHA will have approximately 6 million customers and revenues of $4 billion. In addition, the merger is expected to save VHA $2 billion in operating costs annually.

Vodafone appears to be the stronger partner in the deal, with Vodafone executives to serve as chairman, CFO and non-executive directors of VHA while Hutchison 3G Australia CEO Nigel Dews will serve as CEO of VHA. Hutchison 3G Australia will also pay Vodafone $500 million to compensate for the differences in the companies’ values.

The deal is expected to close by mid 2009, and after regulatory review the deal will be posed to shareholders at an extraordinary general meeting in April.

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