Vodafone and TPG in merger talks

The word is out, TPG and Vodafone are in talks to merge and potentially create Australia’s second biggest telco.

Both Vodafone and TPG released statements to the stock exchange today confirming speculation that talks were underway, with TPG describing it as a “merger of equals” and Vodafone as “two highly-complementary” companies.

It’s a fascinating conversation – and it may lead to nothing, but talks like this don’t get this far without some fire where the smoke originates as they say.

What’s in it for Vodafone?

This is all about synergies.  Vodafone is first and foremost a Mobile company with a recent strong and solid surge into fixed line broadband (NBN).

TPG has 2 million fixed line customers with their acquisition of iiNet so this merger makes them a strong and solid force in the NBN

What’s in it for TPG?

They’re doing their best to become our fourth mobile network – but perhaps they’ve realised just how expensive that is?  Building towers right across Australia? There’s no domestic roaming happening across carriers, so they really need a national network – fast.

How might it work?

Total speculation, but you’d expect the existing brands to continue to operate, but with a much larger customer base and huge backend savings not just in people, but in fibre backhaul networks – there’s some margin to be made in both mobile and fixed line customers.

It’s all just talks, but if it happens, you’d have to say the combined group would outshine Optus on scale, and be hot on the heels of a declining Telstra – particularly in home NBN connections with millions more up for grabs as the roll out continues.