Australian Regulators Question Mobile Market Consolidation, Possible Impact of 5G

Mobile market consolidation from four to three now is an issue in Australia. At least partly at issue is whether the combination is a vertical merger between companies that operate in different parts of the communications business, or a horizontal merger that combines firms in the same lines of business.

But regulators also are signaling they might consider the merger in the context of converged networks combining fixed and mobile elements, something rather new in such competitive evaluations.

Also, the change in markets potentially caused by 5G seems a clear issue as well, as the ACCC believes 5G has potential to create a single functional market where traditionally there have been two.

The Australian Competition and Consumer Commission says the proposed merger of Vodafone and TPG will lessen competition, as it will remove a competitor from the mobile market and because Vodafone might be removed as a competitor in the fixed services market.

“A mobile market with three major players rather than four is likely to lead to higher prices and less innovative plans for mobile customers,” said ACCC Chairman Rod Sims. “Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor.”

“Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base,” said Sims.

TPG has approximately 1.9 million retail fixed broadband subscribers and  421,000 mobile subscribers.

Vodafone is the number-three mobiler service provider and owns a network approximately half the size of Optus (number two by market share) and one quarter that of Telstra, the mobile market leader.

“In summary, the ACCC is concerned that the removal of TPG as a significant competitor for mobile services will result in higher prices and lower quality for retail mobile services,” the ACCC says.