Allowing a $15bn merger between telecommunications companies TPG and Vodafone would snuff out the prospect of a new mobile network to challenge the industry’s dominant players, Telstra and Optus, the competition regulator has told a court.
Appearing before the federal court on Tuesday, counsel for the Australian Competition and Consumer Commission, Michael Hodge QC, said it was “entirely commercially realistic” to say that TPG would resume previous plans to roll out a network if the merger was stopped.
But counsel for TPG, Ruth Higgins SC, said TPG’s plans were effectively killed off by federal government “security guidance” provided in August last year that advised against using equipment from the Chinese supplier Huawei to create 5G networks.
Vodafone and TPG are challenging an ACCC decision opposing their merger in a case that has excited more attention than usual because it has forced TPG’s reclusive billionaire managing director, David Teoh, to make an extremely unusual public appearance.
Teoh, who has been photographed by the media only once, will give evidence later.
The ACCC has also boosted the profile of the hearings by hiring Hodge, one of the counsels assisting at the Hayne banking royal commission, to represent it.
If the merger is kiboshed it was likely TPG would create its own network to compete with the existing ones run by Telstra, Optus and Vodafone, the regulator has said.
Higgins told the court the government “ban” on Huawei put a stop to TPG’s plans to create a new mobile network, even though it had previously tried to do so in 2017 after purchasing a chunk of radio spectrum.
“By mid-January 2019 it was clear the Huawei ban effectively blocked TPG’s pathway to upgrading its network to 5G,” she said.
She said TPG’s board resolved that “it did not make sense for TPG to spend shareholder funds rolling out a network that could not be upgraded to 5G”.
Counsel for Vodafone, Peter Brereton SC, said it would be “commercially crazy” for TPG to create a fourth network now.
“There are better options for TPG to use the assets that they have, and your honour will have the TPG senior decision-makers along to tell you why they wouldn’t do it,” he said.
Hodge said TPG would go back to its previous plan: to roll out a network using the current generation 4G technology and then upgrade it to 5G.
He said there was no roadblock to TPG doing this.
“When you go back and look at the objective facts it is difficult to understand how that could be put up in front of your honour,” he said.
The hearing continues.