SYDNEY, 9 FEBRUARY 2009 - The two carriers announced the agreement this morning. The move will create a new carrier with approximately 6 million customers and annual revenue of around $4 billion.
The VHA group will use the Vodafone brand on its services, but Hutchison's 3 brand will be maintained during an interim transition period, the two companies said in a statement.
Vodafone Asia-Pacific chairman Nick Read will chair the new group, while current Hutchison chief executive Nigel Dews will become VHA's CEO. Vodafone managing director Russell Hewitt will become a non-executive director of the new group, while Vodafone Australia finance chief Dave Boorman will take the CFO title.
Hutchison will pay Vodafone $500 million to equalise the value of the businesses in the partnership, the payment facilitated by a shareholder loan from Vodafone payable within 18 months.
The groups said that operating and capital expense synergies were expected to be more than $2 billion after integration costs had been taken out.
The new group will pay Vodafone's British parent 1 per cent of service revenue as a licensing fee.
"This transaction will benefit customers in Australia as it creates a company with the necessary scale to compete strongly in the mobile market," Vodafone global chief executive Vittorio Colao said in a statement.
The new group said that "utilising existing network arrangements and planned network build", it would have coverage of 95 per cent of the population, with 3G coverage available to 63 per cent of the population.
Both Vodafone and Hutchison's 3 service already operate within a number of partnership or joint-venture arrangements. Vodafone shares its metropolitan-area 3G network with Optus, while Hutchison has roaming and network-sharing agreements with Telstra. Hutchison also runs its network and information technology operations through an outsourcing arrangement with Ericsson, which also provides network services to Vodafone.
Network complexity and challenges ahead
Commenting on the merger, Nathan Burley, an analyst at the advisory firm Ovum, said, "The merger will not be without challenges. Both Vodafone and Hutchison have existing network joint ventures with the two other mobile competitors in Australia. The new entity has stated that both ventures will continue to run as currently. However, no doubt in order to realise network savings some changes will be required in the medium term."
"We believe the Vodafone/Optus joint venture will be simpler to unwind," he said. "Since, the 3GIS joint venture between Hutchison and Telstra includes all 2100MHz 3G spectrum and network assets. Vodafone Australia is also currently building 3G/HSPA to 95 per cent of the population, based on 900MHz spectrum, while 3 Australia has a roaming agreement with Telstra for 3G services, at 850MHz, to 96 per cent of the population."
"The new operator must execute impeccably, minimising impacts on end-users, to mitigate risks," he cautioned. "At a time when both the industry is changing and there are questions over economic outlook, the global experience and expertise of the two parents will be priceless."
