Vodafone Australia admits to misleading carrier billing service

After an Australian Competition and Consumer Commission (ACCC) investigation, Vodafone Australia has admitted misleading consumers through its third-party Direct Carrier Billing (DCB) service.

The investigation looked into transactions made between 1 January 2013 to 1 March 2018, though it is most likely Vodafone broke the rules upon the introduction of an Australian Securities and Investments Commission Act in 2015.

“Through this service, thousands of Vodafone customers ended up being charged for content that they did not want or need, and were completely unaware that they had purchased,” said ACCC Chair Rod Sims. “Other companies should note, money made by misleading consumers will need to be repaid.”

The service was first introduced in January 2013 allowing customers to purchase digital content from third party developers such as games, ringtones and apps, with charges being applied to pre-paid and post-paid accounts.

The issue which Vodafone seems to be facing is the service was automatically applied to customer accounts, with purchases being made with one or two clicks. As the customer was not suitably informed, the service has been deemed to be misleading.

Vodafone has already begun the process of contacting impacted customers and will be offering refunds where appropriate. The telco has phased out the majority of the service already, owing to an increasing number of complaints during 2014 and 2015.

While a final judgment has not been released just yet, a confirmation and fine will likely follow in the next couple of weeks, other Australian telcos have been found guilty of the same offence. Both Telstra and Optus have been fined AUS$10 million for their own misleading carrier billing services.

Although it is hardly rare for a telco to be found on the wrong side of right, especially in Australia where the ACCC seems to be incredibly proactive, such instances will create a negative perception at the worst time for the telcos.

In an era when the telcos are searching for additional revenues, carrier billing initiatives are an excellent option. Assuming of course the telcos don’t mess it up.

The digital economy is becoming increasingly embedded in today’s society though there are still many consumers who will begrudgingly hand over credit card details to companies with whom they are not familiar. This mistrust with digital transactions could potentially harm SMEs while providing more profit for the larger players who have established reputations on the web.

In this void of trust and credibility, the telcos have an opportunity to step in and play the intermediately as a trusted organization; how many people have an issue with handing credit card information over to a telco?

There are plenty of examples of this theory in practice; Amazon or eBay are the most obvious and most successful. These are online market places which allow the flow of goods and cash between two parties who may not have had a prior relationship. The consumer might have an issue paying Joe Bloggs Ltd. as there is little credibility, though many trust the likes of Amazon and eBay, allowing the third party to manage the transaction and take a small slice of the pie.

Carrier billing can be an excellent opportunity to add value to a growing digital ecosystem, using the consumer trust in the telcos to drive opportunities for those businesses which want to grow online. However, should there be a perception that the telcos do not act responsibly with a customers’ bill, this opportunity will dry out very quickly.

Aside from costing Vodafone a couple of million dollars, this also dents the credibility of the telco (and overall industry by association). This example suggests it is just as risky purchasing goods through the telco as it is an unknown supplier online.

Telstra confirms 6000 jobs to be cut by the end of this year

Australian telco Telstra has announced steady progress for its T22 restructuring plan, allowing it to retire AUS$500 million of legacy IT equipment and bring forward 6,000 job cuts to 2019.

The restructuring plan, T22, was introduced during June 2018 in an effort to simply the structure of the business and improve profitability. The plan is to remove 8,000 roles in total from the business, through replacing legacy systems, digitising certain processes and simplifying the management structure of the business.

According to Telstra executives, who’s jobs are seemingly secure, the firm had become a burdensome beast and needed streamlining. This plan was set in motion not only to reduce the complexity of the organization, but also deliver AUS$2.5 billion in cost efficiencies by 2022.

In today’s announcement, 6,000 of the planned redundancies have been brought forward from 2020 to 2019, increasing the restructuring costs for this financial year by AUS$200 million and introducing a AUS$500 million write down of the value of its legacy IT assets. Investors might not have expected such a hit in 2019, but the news should not have come as a surprise.

“We understand the significant impact on our people and the uncertainty created by these changes,” said CEO Andrew Penn. “We are doing everything we can to support our people through the change and this includes the up to $50 million we have committed to a Transition program that provides a range of services to help people move into a new role. We expect to have announced or completed approximately 75 percent of our direct workforce role reductions by the end of FY19.”

According to Penn, plans are on track and the majority of the work is behind the team. Employees are yet to discover their fate, however the consultation is expected to finish in mid-June

Headcount FY 2018 total revenue Revenue per employee
Telstra 32,293 $20.05 billion $620,877
BT 94,800 $30.01 billion $316,561
Telefonica 120,138 $54.33 billion $452,229
Verizon 144,000 $130.863 billion $908,770

All figures in US Dollars

While Telstra executives might not like the balance of the spreadsheets as it stands, you can clearly see from the table above it is not in the worst position worldwide. Restructuring plans are certainly having more of an impact at some telcos, take BT for example, though some might be aggrieved when being forced into redundancy.

That said, NPAT (net profit after tax) for 2018 was AUS$1.2 billion, 4.1% of total revenues. When compared to Verizon, where profits represented 8.1% of total revenues, or Telefonica where it was 7.4% for 2018, you can begin to see why the management team is under pressure to find efficiencies across the business.

Redundancies, while never pleasant to talk about, are commonplace in the telco industry and will continue to be so. As businesses evolve, more processes become automated and more technology becomes redundant. This will have an impact on any workforce, but when you consider the complexities of managing a network or securing the digital lives of customers, the demand of digitisation becomes more apparent for the telcos.

Unfortunately for Telstra, it also happens to operate in an environment which makes delivering connectivity incredibly challenging and expensive (i.e. the scale of Australia and the geographical isolation of some communities). Add in the fact it will now longer be able to work with Huawei or ZTE, the vendor pool becomes smaller, adding more financial risk to the procurement channels. All of these factors add up to more financial outlay when it comes to the business of delivering connectivity, and pressure to improve operational efficiencies.

Merger of Vodafone Australia and TPG blocked

The Australian competition authority has decided that the telco merger of Vodafone and TPG amounts to excessive consolidation and has blocked it.

This decision comes after months of agonising by the Australian Competition and Consumer Commission (ACCC), which started looking into the deal last December, several months after it was first proposed. Vodafone is one of three major MNOs over there, while TPG is one of three major fixed-line players.

“Broadband services are of critical importance to Australian consumers and businesses, across both fixed and mobile channels,” ACCC Chair Rod Sims said. “Given the longer term industry trends, TPG has a commercial imperative to roll out its own mobile network giving it the flexibility to deliver both fixed and mobile services at competitive prices. It has previously stated this and invested accordingly.

“Vodafone has likewise felt the need to enter the market for fixed broadband services. These moves by TPG and Vodafone are likely to improve competition and future market contestability. TPG is the best prospect Australia has for a new mobile network operator to enter the market, and this is likely the last chance we have for stronger competition in the supply of mobile services.

“Wherever possible, market structures should be settled by the competitive process, not by a merger which results in a market structure that would be subject to little challenge in the future. This is particularly the case in concentrated sectors, such as mobile services in Australia.

“TPG has a proven track record of disrupting the telecommunications sector and establishing itself as a successful competitor to the benefit of consumers. TPG is likely to be a vigorous and innovative supplier of mobile services in Australia, offering cheaper mobile plans with large data allowances, and competing strongly against incumbents Telstra, Optus and Vodafone.

“TPG has the capability and commercial incentive to resolve the technical and commercial challenges it is facing, as it already has in other markets. TPG already has mobile spectrum, an extensive fibre transmission network which is essential for a mobile network, a large customer base and well-established telecommunications brands.

“TPG is also facing reducing margins in fixed home broadband due to the NBN rollout. Further, there is the growing take-up of mobile broadband services in place of fixed home broadband services which is expected to increase especially after the rollout of 5G technology. After thorough examination, we have concluded that, if this proposed merger does not proceed, there is a real chance TPG will roll out a mobile network.”

It’s great that Sims offered such a detailed rationale, but he could have just said “We want to force Vodafone and TPG to diversify through organic investment rather than M&A.” He doesn’t seem to buy TPG’s line that the Huawei ban makes it impossible for it to build its own mobile network, but it seems to be a big leap of faith to conclude that blocking this merger will automatically result in a change of heart.

Google starts droning on about home delivery

Another one of Google’s bright ideas is starting to bear fruit as subsidiary Wing starts testing an air delivery service in North Canberra, Australia.

Almost every company on the planet searches for the diversification holy grail, but few have the patience, investor confidence and bank accounts to see through the quest. Google is one of the rare exceptions. A company which seems to revel in investing in the preposterous, giving every idea as much capital as necessary to ensure it can be a success, should the conditions be right. Wing is another example of this.

“Today, we are excited to be launching our first air delivery service in North Canberra,” the Wing team wrote in a Medium blog. “Our service allows customers to order a range of items such as fresh food, hot coffee or over-the-counter chemist items on our mobile app and have them delivered directly to their homes by drone in minutes.”

The initial service will only be available to a limited set of eligible homes in the suburbs of Crace, Palmerston and Franklin for the moment, but the ambition is clear; drones can disrupt the logistics and delivery segments.

The first partners of the service will be Kickstart Expresso, Capital Chemist, Pure Gelato, Jasper + Myrtle, Bakers Delight, Guzman Y Gomez, and Drummond Golf, allowing customers to choose from a range of goods, though Wing has stated it is open to new ideas.

Starting in 2014, Wing has been working to realise the drone delivery dream in Australia. Live trials started 18 months ago, delivering food, small household items and over the counter chemist products to more than 3,000 times to Australian homes in Fernleigh Park, Royalla and Bonython. Progress might have been slow, but that never seems to bother the Googlers.

The pursuit of disruption is becoming somewhat of a speciality for Google, either through acquisition or nurturing ideas in the Moonshot labs. Loon is another idea few companies would have thought realistic, but in signing a partnership with Telkom Kenya, Google is proving the delivery of connectivity through balloons is a perfectly reasonable business plan.

This is not to say every Google idea turns out to be a raving success. Google Fiber started off well but soon got canned as the search giant realised fixed line connectivity was much harder than it first seemed.

This is of course not the only attempt at monetizing drone technology through home delivery. AT&T has been creeping forward with its own drone programme in the US, while Amazon has been conducting trials in the UK, and Vodafone delivered an iPhone to a customer in New Zealand. All of these trials would have been deemed successful, though you have to wonder whether they are commercially viable.

For Amazon, the idea of drone delivery makes sense. Having drones to deliver goods from fulfilment centres to remote locations answers a difficult logistics issue, while AT&T and Vodafone might be able to craft a connectivity offering, but Google has something which many of these companies do not; existing relationships with numerous businesses, irrelevant as to whether they are large or small.

Almost every business in the developed markets will have a relationship with Google, such is the power, influence and simplicity of the platform. This extends from listings in the search engine, the Maps products or through to the YouTube platform. This offers an incredible opportunity to leverage relationships and make an idea which might not be considered commercially viable profitable.

Once again this demonstrates the power of the internet and new technology. Through a simple app, customers will be able to do more without leaving the flat, while businesses will be able to expand the perimeter of their operations.

Of course, you have to consider whether local and national governments are ready to foster this kind of entrepreneurship, but that has never stopped the internet giants before. Google is showing its pedigree for innovation again, taking an idea which seems ridiculous and potentially making it work.

Austria and Australia join the march against Silicon Valley

The days of the wild-west internet seem to be coming to a close with Austria and Australia becoming the latest nations to update the rules governing the business activities of the internet giants.

At the foot of the Alps, the Austrians are proposing a new 5% sales tax on digital revenues which are realised in the country, another European state to tackle the ‘creative’ accounting practices of Silicon Valley. Down under, the Australian Government plans on introducing tougher rules which will place greater accountability on social media platforms for extreme and offensive content.

For years the world watched in amazement as the likes of Google, Facebook and Amazon climbed higher up the ladder of influence. We gazed in wonderment as Silicon Valley seemed to pluck profits out of thin-air and their CEOs hit celebrity status. But then the scandals started to roll-in and we all realised these companies had abused the privilege of self-regulation.

The Cambridge Analytica scandal was the watershed moment, a saga which dominated headlines around the world for months and hauled politicians away from free lunches and back into the debating chambers. All of a sudden everyone realised the likes of Zuckerberg, Bezos and Page were not our friends, but incredibly intelligent businessmen who were exploiting the grey areas sitting idly between the mass of criss-crossing red-tape.

What followed this scandal was a more forensic look at the business models of the internet giants. Those looking close enough found trickily worded terms and conditions, confusing processes, ransom opt-ins and abused freedoms. Users were being tracked without their knowledge, personal information was being traded as a commodity and tax havens were being exploited. Opinion on Silicon Valley turned sour.

On the other side of the coin, it wasn’t just the craft and cunning of Silicon Valley lawyers to blame, but inadequate rules for today’s digital era. Politicians and regulators woke up to the fact rules and legislation needed to be updated to create a fair and reasonable policy landscape to hold the internet giants accountable. Experts were brought in to account for the vast gulf in competence and the march towards Silicon Valley began.

A perfect storm has been brewing around the internet giants and as the weeks pass more countries are taking a more stringent approach to the business of the internet. Australia has been trundling along with incremental progress, and now Austria has entered the fray.

“Through the digital tax package, we are closing tax loopholes and thereby ensuring that large digital corporations, agency platforms and retail platforms are called to account,” said Austrian Finance Minister Hartwig Löger. “Through fair taxation of the digital economy, we are establishing equity in taxation.”

Moving forward, a digital tax of 5% will be introduced for large digital corporations, those with global sales of € 750 million, of which €25 million originates in Austria. The new rules will also take away VAT exemptions for deliveries from foreign countries. Previously, orders valued below €22 were exempt from the tax.

“Through this measure, we are taking digital agency platforms to task,” said State Secretary of Finance Hubert Fuchs. “No one is entitled to evade the obligation to pay tax.”

Austria is of course not alone in this tax assault. As the member states of the European Union cannot agree on a bloc-wide tax mechanism, plans were blocked by nations who benefit from the status quo such as Ireland, individual states have gone on alone. France and the UK have already set plans in motion, but we expect such proposals to start snowballing before too long.

Australia is targeting a different area of contention however. Following events in Christchurch, New Zealand, and the simultaneous live-streaming of the incident, the Australian Government has introduced new rules which will hold social media and other social media platforms accountable for the dissemination of offensive material.

The Sharing of Abhorrent Violent Material bill creates new offences for content service providers and hosting services who fail to act expeditiously to remove videos containing “abhorrent violent conduct”. Such conduct is defined as terrorist acts, murders, attempted murders, torture, rape or kidnap.

The technology community and legal experts have slammed the new rules, and while there are some valid points, the social media and hosting platforms might have to be forced forward. It is an incredibly difficult task to identify these videos, such is the complexity of identification in such as vast swarm of uploaded content nowadays, but without the threat of penalty there is a risk progress will not move at a desired pace.

Following the incident, Facebook pointed out that it did take down the video quickly, though it was not able to use AI to identify the content. This is where it becomes incredibly difficult for the technology industry; these applications need abhorrent content to be trained to identify abhorrent content. It’s a bit of a catch-22 situation, but harsh penalties for non-compliance will force the industry to find a solution.

“We have heard feedback that we must do more – and we agree,” said Facebook COO Sheryl Sandberg in a letter to the New Zealand Herald. “In the wake of the terror attack, we are taking three steps: strengthening the rules for using Facebook Live, taking further steps to address hate on our platforms, and supporting the New Zealand community.”

Sandberg has promised new restrictions on how live videos can be uploaded and streamed to the platform, though details were incredibly thin. Facebook will not want to introduce too many restrictions, making the process too convoluted and tiresome will impact user experience, though it clearly has to do something. The opportunity to broadcast horrific acts has become too accessible.

This is the problem which Facebook and everyone else in the digital economy is facing. The promise is to open up the gates and allow people to express themselves, but unfortunately there are people who will take advantage of this situation. It is an incredibly difficult equation to balance.

Technology will eventually help the internet companies get to a suitable position, with the potential of AI grafting through the millions of uploads, however the training period is going to be a difficult process. The risk of going too sensitive is restricting free speech, though with content uploaded from shows such as Game of Thrones, there is plenty of room for error.

The internet giants will want to resist change, despite giving the impression of encouraging more regulation and government intervention, but it won’t be able to hold back the tides forever. With privacy concerns, fake news, tax evasion, political influence, anti-trust accusations and the unknown power of data analytics, the internet giants are simply fighting on too many fronts.

These are companies who have incredible financial power and immense armies of lobbyists, but Silicon Valley is the bad guy right now. Politicians have spotted an opportunity to make PR points by unloading on the punching bag, and you can guarantee there will be many lining up to take a swing.

Australia poised to significantly increase regulation of OTTs

Australia is the latest country to cast an eye towards Silicon Valley, revamping rules to create a regulatory framework with greater oversight and authority over the booming digital ecosystem.

While the digital economy has operated in a relatively tether-free fashion to date, various scandals throughout the last 18 months have shown these companies are not mature or honest enough to manage themselves. Facebook has drawn the lion’s share of the headlines, but the social media giant is not alone in abusing the system; this is a pandemic with Silicon Valley as ground zero.

“While online services like Facebook, Apple, Amazon, Netflix and Google bring undeniable social and economic benefits to Australians, they have now become global giants with significant market power in Australia,” said Nerida O’Loughlin, Chair of the Australian Communications and Media Authority (ACMA).

“As aggregators, curators and distributors of content – in particular news and journalistic content—digital platforms have significant influence. But they are not fully considered within current media and communications regulation.”

The ACMA statement follows the Digital Platforms Inquiry Preliminary Report from the Australian Competition and Consumer Commission (ACCC) which calls for regulatory reform to tackle newly emerging segments of the digital economy, as well as greater powers to gain insight into how businesses such as Google and Facebook actually work.

This has been the great conundrum of the last few years; these companies have incredible power and influence over society and business, though due to opaque transparency reports and sheer complexity, few understand the cogs of the digital machine. This is not a healthy position; these companies should not be allowed to operate in a cloud of confusion, such is the power they wield. It would be irresponsible of any government to allow such a dangerous status quo to continue.

What this report suggests is the creation of a new set of rules, which would govern the digital economy as what it is. These companies are no-longer simply platforms, and they are not digital publishers. For years, regulators have tried to squeeze them into existing regulatory frameworks and it has not worked. The creation of new rules, fit for purpose to tackle the digital economy and specific to the companies which dominate it, are critical.

As you can probably imagine, the internet giants are not particularly happy with this assault on their freedoms. Facebook has accused the ACCC of protecting traditional media titles at the expense of digital and the consumer, while Google has suggested the ACCC is ill-informed when it comes to basic understanding of the current state-of-affairs.

The aggressive and patronising objections to the ACCC and ACMA should come as little surprise as the internet giants face greater controls on their businesses throughout the world. Australia and Europe seem to be the tip of the spear, but others will soon follow suit once they see how regulations can be effectively reformed. Unfortunately for the internet giants, there is not a single focal point.

In Europe, certain states are putting stricter rules in place for the removal of offensive materials, Germany is leading the charge here. GDPR is a European-wide response to privacy concerns. The tax-avoidance schemes are being tackled by France and the UK. The Netherlands is tabling new rules which would made foreign acquisitions more difficult. The digital business model is being assaulted from numerous angles, and quite rightly so.

Over the last decade, the internet giants have become experts at wriggling through the red-tape maze and exposing the regulatory grey areas. This is only possible because rules have not been designed specifically for the internet economy, an anomaly in today’s world. Every other industry has rules which are designed specifically for those circumstances, and the world is starting to wake up to the need for the same here.

Arguments against might take the form of slowing progress, but the internet giants have not shown themselves responsible enough to self-regulate. Cambridge Analytica, overly-complex T&Cs, data breaches, insecure databases, irresponsible data processing and handling activities, hosting of offensive material and unauthorised location tracking scandals are just a few areas which need to be addressed.

Regulators and legislators need to wake up and start governing the digital economy. Thankfully, Australia and Europe are taking the fight to Silicon Valley.

Nokia launches a 5G FWA router and Optus buys some of them

Nokia’s big MWC 2019 reveal went big on 5G fixed wireless access with the launch of its FastMile 5G Gateway.

FWA is a popular early use-case for 5G. It’s presumably a lot simpler to set up a 5G connection to a static domestic router than to a mobile handset, but you still get to say you’ve done some 5G. Aside from showcasing 5G in the wild, FWA is all about providing decent broadband to places that otherwise lack it.

Nokia claims the FastMile 5G Gateway serves up 10-25 times more bandwidth then LTE. It uses sub-6 GHz 5G spectrum, so will still have half-decent range. It’s being described as ‘plug-and-play’, which is geek-talk for ‘easy to set up’ and seems like a fairly inoffensive bit of industrial design. We don’t know what its costs though.

FWA is also being positioned as an early bit of ROI for operators upgrading their networks to 5G, although Nokia is only anticipating around 50% growth in its use – from 18 million to 27 million households globally – by 2022. When you’re dropping a ton of cash on a network upgrade it’s never to early to have something to show for it.

One operator that seems at least partially convinced is Optus in Australia, where you can imagine there are a fair few remote households in need of a bandwidth boost. It has been the first to trial the FastMile in a live network and seems to think it’s gone well, so much so that it will have 50 live 5G sites using it by the end of March.

“These are historic milestones for Optus as we focus on delivering our customers the very best 5G experience,” said Allen Lew, CEO at Optus. “Nokia has partnered with Optus to accelerate our preparations for 5G and as a result we are first in the world to deliver live 5G NR FWA services using the Nokia’s FastMile 5G Gateway.”

“We are excited to partner with Optus on their 5G vision with solutions that will create a better, more connected future for Australia,” said Sandra Motley, President of Nokia’s Fixed Networks Business Group. “With our 5G FastMile solution Optus will be able to unlock the full potential of its mobile network and deliver new ultra-broadband services to customers.”

The rest of Nokia’s announcements were predictably 5G-ish too. There are some trials and general 5G conviviality with Bharti Airtel, Korea Telecom and Vodafone. On top of that Nokia is helping Sony Pictures bleed its Spiderman asset yet again by combining with Intel to serve up some kind of 5G VR experience at their respective MWC booths.

 

 

TPG kills mobile plans blaming Huawei Aussie ban

Australian telco TPG has abandoned plans to create a fourth mobile offering after the government order blacklisting Huawei, its main supplier, from the country.

The last couple of months have seemingly been a series of headaches and large financial outlays for the telco. It has been attempting to improve connectivity for the people of Australia through a very expensive network deployment, but then the Australian government decides to kick it in the stones by banning its supplier and poo-pooing a merger which would help create financial synergies to ease said deployment.

According to the Guardian, enough is enough and the TPG management team have given up. No-one gets a fourth mobile player now.

“It is extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control,” said David Teoh, Executive Chairman of TPG.

Perhaps there is a bit of poetic justice here. The Australian government has been poking and prodding the industry in recent months, proving to be one of the most intrusive of political administrations in the ‘Western’ world, but with TPG ditching the mobile network the Aussie governments ambition to create more competition has come crashing down around it.

Having already spent $1.26 billion for mobile spectrum during the 2017 auction, the total bill for the network was set to exceed $2 billion. TPG had opted to use Huawei as its main vendor for the project, though the ban from the Australian government on the Chinese company participating in the connectivity euphoria effectively ended this ambition. Now it seems TPG has just had enough, throwing in the mobile connectivity towel altogether.

On the bright side for TPG, this move effectively kills off 50% of the Australian Competition and Consumer Commission (ACCC) objections to the Vodafone merger.

Although the merger between TPG and Vodafone has been rounding the offices for approval for some time now, the ACCC recently extended its own deadline to investigate the matter further. The Aussies were desperate for a fourth national mobile operator and with TPG’s potential disruptive offer, its prayers had been answered. Then rumours of a merger started.

In extending the deadline to either approve or deny the merger application, you get the impression the ACCC is buying itself time to justify a pre-determined position. We suspect it wants to say no and create a position of four operators but hasn’t got enough material to do so.

That said, without a TPG mobile network the ACCC can only object to a removal of competition in the fixed line segment. We can imagine Vodafone would be happy to ditch its own fixed network ambitions if it means a greenlight for the merger.

In one swift movement the Australian government has lost its fourth mobile network operator while the competition watchdog might have lost any ammunition it had for denying the TPG/Vodafone merger. Not the greatest day for the Aussies.

Nerves jangle as Aussies delay TPG/Vodafone merger decision

The Australian regulator has pushed back the deadline for its decision on whether Vodafone Australia and TPG can move forward with the proposed £8.2 billion merger.

While this far from a definite sign the merger will be blocked by the watchdog, the longer the evaluation process goes on for, the stronger the feelings of apprehension will get. If the Aussies were happy with the plans to create a convergence player, they would have said so, but perhaps the regulator is just making sure it effectively does its due diligence.

The tie up between the pair is supposed to be an effort to capitalise on convergence bounties and reinvigorate the competitive edge of the business. That said, last month the Australian Competition and Consumer Commission (ACCC) weighed into the equation raising concerns a merger would de-incentivise the market to offer low-cost services.

According to Reuters, the ACCC has extended its own self-imposed deadline to evaluate the merger by two weeks to April 11. If the watchdog cannot build a case to deny the merger by that point it probably never will be able to, but you have to wonder whether the additional time is being used to validate its position of opposition.

All regulators are supposed to take a balanced and impartial position when assessing these transactions, though its negative opinion last month suggests the agency is looking for a reason to deny as opposed to evaluating what information is on the table. Giving itself an extra couple of weeks will only compound this theory in the mind of sceptics.

To be even handed though, the consolidation argument is perfectly logical and completely absurd depending on who you are. There are benefits and negatives on both sides of the equation, irrelevant as to how passionately supporters and detractors preach to you. For all the arguments and evidence which are presented, a bucket-full of salt will probably be required.

Aussie watchdog sniffs around TPG and Vodafone merger

The Australian Competition and Consumer Commission (ACCC) is having a closer look at the AUS$15 billion TPG and Vodafone merger, with the signs looking rather ominous for the pair.

After initially being rumoured in August, the merger was confirmed with the pair targeting convergence trends to source fortunes down-under. Neither telcos has been tearing up trees in the market, TPG’s recent financials revealed 0.5% growth over 2018 while Vodafone posted a first-half net loss of AUS$92.3 million in July, though this merger could have been viewed as a means to become more profitable.

However, the ACCC is citing competition concerns in both the mobile and the broadband business units. When the watchdog starts to get twitchy, it doesn’t necessarily bode well.

“Our preliminary view is that TPG is currently on track to become the fourth mobile network operator in Australia, and as such it’s likely to be an aggressive competitor,” ACCC Chair Rod Sims said.

“Although Vodafone is currently a relatively minor player in fixed broadband, we consider it may become an increasingly effective competitor because of its high level of brand recognition and existing retail mobile customer base.”

As separate companies, TPG has the broadband heritage with ambitions in the mobile game, while for Vodafone it is the opposite. Any regulator or competition authority which is starting to see organic diversification will start to get excited, though this merger will effectively kill off any promise of additional players in the individual connectivity segments, as they would lean on the new partners strength. The promise of four separate mobile and broadband telcos is disappearing in front of the ACCC’s eyes.

The question which remains is whether Australia needs a fourth player in the mobile and broadband segments for the market to remain competitive? There are of course pros and cons to both sides of the argument, though risk-adverse public sectors bodies tend to believe more providers means a better outcome for the consumer due to competition.

This is certainly what appears to be happening in Australia, though this is a country which needs to operate its own rules.

In markets like the UK, fewer providers might not mean less competition. The land mass which needs to be covered is comparatively small, therefore it is not out of the question to have genuine national providers, which can offer 90% or greater coverage. This means choice for the consumer and the providers have to scrap for attention and subscriptions.

However, Australia is massive, incredibly varied and contains some very hostile environments; not exactly the perfect playing field for telco expansion and greenfield investment. The risk of localised monopolies emerging are greater, due to the final burden of increasing coverage or entering into new segments. With this in mind you can see why the ACCC is getting a bit twitchy.

Of course, consolidation means a bigger subscriber base, greater revenues and therefore increased CAPEX budgets. Investors and management teams have more confidence in being able to upsell services to existing customers, therefore the risk in investing in new infrastructure or upgrades is decreased.

It is six of one and half a dozen of the other when you look at it, though that will come as little comfort to the TPG and Vodafone executives now facing the scrutiny of the ACCC.