Vodafone and Hutchison Whampoa will merge their Australian businesses

Global mobile phone companies Vodafone and Hutchison Whampoa will merge their Australian businesses to create a company able to take on the dominant operators, the two firms said on Monday.

The move creates a company with 6 million customers and combined annual revenue of A$4 billion ($2.7 billion), close in scale to Australia’s two dominant mobile companies, Telstra Corp and Optus, owned by Singapore Telecommunications.

The joint venture would operate under the Vodafone brand, and will aim to provide a range of mobile services to 95 percent of the population.

“This transaction will benefit customers in Australia as it creates a company with the necessary scale to compete strongly in the mobile market,” said Vodafone chief executive Vittorio Colao.

Telstra has annual mobile revenues of around $A5.5 billion, while Optus’ revenues are more than $4 billion.

Vodafone has about 4.2 million customers and had earnings before interest, tax, depreciation and amortization (EBITDA) of A$499 million in the year to March 30, 2008. Hutchison had EBITDA of A$173 million in the year to June 30, 2008. “Customers can look forward to a wider portfolio of voice and data services, delivered under the Vodafone brand over a high quality network, which through ongoing investment will bring 3G coverage to around 95 per cent of the population.

“This is an important step in the transformation of the Australian mobile industry.”

Both companies have struggled to make enough profits – with Hutchison still in loss making start-up mode – to justify continued expansion of their bandwidth hungry third-generation networks.

A statement said they plan to make $2 billion of operational and capital spending savings through the deal.

The deal also means good news for shareholders of Telstra and Optus in the short term as it reduces competition in the sector but in the longer term a more cohesive mobiles-only third force could see pressure on both groups, analysts said.

The mobile industry, which for the past two decades has been driving growth in the telecommunications industry, is facing tougher times with a number of operators in Europe recently reporting a decline in revenue.

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