Missed the point: Top law firm backs block of TPG-Vodafone merger

The competition regulator's controversial decision to block a $15 billion merger between Vodafone and TPG has been defended by a leading commercial law firm that has warned critics not to rush to judge ACCC chairman Rod Sims.

After choosing on Wednesday to stop the merger from going ahead based on an eight-month analysis, the Australian Competition and Consumer Commission was criticised by media commentators, the business community and investors. Vodafone Hutchison Australia and TPG Telecom plan to launch an appeal against the decision in Federal Court over the next few weeks.

TPG Executive Chairman David Teoh.

TPG Executive Chairman David Teoh.

But Arnold Bloch Leibler partner Zaven Mardirossian, who has represented telecommunications clients such as Telstra, said competition experts and investors who have "come out and said this is wrong ... may have missed the point".

"People have jumped to conclusions," Mr Mardirossian said.

"It looks to me like the commission may, on the basis of what it has uncovered, have formed the view that if it knocks back [the merger] there is a good possibility that absent the merger with Vodafone it [TPG] would at some point go ahead and roll out [a fourth mobile network]," he said.

The ACCC has extensive investigation powers when determining whether to approve takeovers and mergers, including the ability to request sensitive business documents and to bring in executives for interviewing and cross-examination under oath.

Vodafone provided more than 25,000 documents through this process and TPG was also compelled to give extensive details to the commission.

This information has not been made public, Mr Mardirossian said, leaving critics of the decision to rely on statements made by the companies themselves.

One of the major areas of the commission's investigation was TPG's plans to roll out a fourth mobile network, which would bring more competition to the market and bring down prices.

When the companies initially announced plans to merge, TPG was in the process of building this infrastructure but in January it cancelled the plans, blaming the government's ban of its supplier Huawei from providing equipment for future high-speed 5G networks.

"After TPG announced they wouldn't go ahead with the roll out [of the fourth network] because of Huawei, the commission will have wanted to test that statement," Mr Mardirossian said. Sources close to the merger process said the ACCC called in other providers, like Ericsson and Nokia, to provide information.

Mr Mardirossian said TPG was an "aggressive" business that was unlikely to take the ban's impact on the network "lying down".

TPG has denied the competition watchdog's suggestion that it might still be able to build the network, claiming it is not financially feasible when using a different provider and arguing the network will not be resumed down the track. Vodafone has criticised the regulator's decision for ignoring what is "feasible" for telcos and instead trying to create an ideal version of the market.

Mr Mardirossian agreed that if ACCC chairman Rod Sims had made the wrong call it could be considered a "free kick" for dominant businesses Optus and Telstra but said that if the decision was right "he'll be vindicated".

"I think you can assume that they [the ACCC] have internally formed the view that it's probably enough to give this a good fight in court."

  • SMH/The Age
This story 'Missed the point': Top law firm backs block of TPG-Vodafone merger first appeared on The Sydney Morning Herald.