TPG and Vodafone merger on the cards

TPG and Vodafone merger on the cards

Two of Australia's largest telcos, TPG (ASX: TPM) and Vodafone, which is operated in Australia by Vodafone Hutchinson Australia (VHA), are in discussions about a potential merger.

TPG confirmed in a short statement this morning that it is in "exploratory discussions" with VHA about a potential "merger of equals" of the two companies.

The listed telco was unable to comment further on the terms of the merger. In fact, TPG says "there is no certainty that any transaction will eventuate".

The announcement comes at an interesting time for TPG, which is soon to release its FY18 results.

The company reported a fall in profit at the first half as its subscriber numbers dwindled.

TPG is currently in the process of building a $1.9 billion mobile network in Australia and controls popular broadband services iiNet and Internode.

Vodafone is the third largest telco in Australia, after Telstra and Optus.

Speaking to AAP, telecommunications analyst Paul Budde says a potential merger makes sense, considering the pressure both companies are under as the NBN rollout continues.

Budde says the merger would give both TPG and Vodafone a considerable boost in subscribers, but could play into the hands of Optus and Telstra who will have one less company to compete with.

"Telstra and Optus will be delighted with this as competition will now be less severe," says Budde.

Shares in TPG have skyrocketed following the seed of information planted this morning. Shares in TPG are up 17.01 per cent to $7.37 per share at 2.11pm AEST; the highest they've been in 2018.

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