Vodafone Australia and TPG Telecom both announced an A$15 billion merger on Thursday.
Under the deal, which will rival Telstra (ASX: TLS) and Optus, TPG shareholders will own 49.9 percent of the group, with Vodafone Australia shareholders owning a majority of 50.1 percent.
“The combination of the two companies will create an organisation with the necessary scale, breadth and financial strength for the future,” Iñaki Berroeta, the chief executive of Vodafone Australia said in a statement.
“The equal terms of the combination preserves the competitive strengths of the two businesses, meaning a sustainable long-term fixed/mobile competitor to Telstra and Optus.”
Berroeta will become the managing director and chief executive of the merged group. David Teoh, who is currently the CEO and chairman of TPG, will become the chairman of the new group.
The deal is expected to be completed next year, subject to approval by watchdogs and the board.
Bernstein analyst, Samuel Chen said: “When you combine the fixed and mobile assets, the new TPG would be in a proper position to deal with Optus … and a full-fledged telecom operation.”
Vodafone Australia is the country’s third largest mobile operator and is jointly owned by Vodafone Group and Hutchinson Telecommunications Australia.
The group has a customer base of around six million.
According to analysts, TPG has an 11,000km-long fibre network providing broadband to businesses. However, the group want to branch out into retail with a fibre-to-the-building offer which could provide broadband to up to 500,000 apartment blocks.
In June, Telstra announced plans to cut 8,000 jobs in a bid to slash costs.
“We have to do this … as an industry we’re at a tipping point,” said chief executive Andy Penn.
“We understand the impact this will have on our employees and once we make decisions on specific changes, we are committed to talking to impacted staff first and ensuring we support them through this period.”
Shares in Hutchison Telecommunications Australia (ASX: HTA) jumped 44 percent. Shares in TPG Telecom (ASX: TPM) surged 18 percent.
