Vodafone, Hutchison in A$4b Australian merger

Vodafone and Hutchison have merged their Australian operations, the firms said today in a joint announcement.

The companies, ranked third and fourth respectively in the local mobile industry, have established a 50:50 joint venture, VHA Ptd Ltd.

The new carrier will pay Vodafone 1% of service revenues each year for the right to its brand, the carriers said in a statement. VHA will retain the rights to Hutchison's 3 brand.

VHA will make a deferred payment of A$500 million ($336 million) to "equalize the value difference between the respective businesses", the statement said.

Vodafone CEO Vittorio Colao said the transaction would create "a company with the necessary scale to compete strongly in the mobile market."

"This is an important step in the transformation of the Australian mobile industry," he said.

Nick Read, currently CEO of Vodafone Asia-Pacific & Middle East, will chair the new company. Hutchison Telecom Australia Ltd (HTAL) CEO Nigel Dews will be CEO.

The merged entity will have around 6 million customers - roughly 4 million from Vodafone just over 2 million from Hutchison's five-year-old 3 service.  Total revenue for the year ended June 30, 2008 was A$4 billion.

VHA will expand coverage to 95% of the population, of which 63% would have access to high-speed 3G services. It will draw on products from both Vodafone and 3.

The deal is subject to approval by ASX-listed HTAL shareholders, the Australian Foreign Investment Review Board and the Australian Competition and Consumer Commission. Vodafone Australia is a 100%-owned subsidiary.

The transaction is expected to close by mid-2009.

The A$500 million deferred payment will be structured as a shareholder loan from

Vodafone to VHA and is expected to be repaid or refinanced within 18 months, VHA said.