In a sign that economic times are tougher than ever; Vodafone and Hutchison Telecommunications, who runs the 3 mobile carrier, have announced that they will merge their businesses together to create a company, which both companies will own 50 percent in the joint venture.
The new joint venture will effectively give Optus and Telstra less competition in the mobile telecommunications sector, but would pressure the other two companies in the long term, according to analysts.
The new company, VHA, will retain both brands during the transition period, but will kill of the “3” brand as they will focus on using the Vodafone banner. In addition, Vodafone will be given $500 million by VHA as a “deferred payment”, according to an ASX statement.
This would now put phones like the Skypephone and INQ1 phones from Three accessible to Vodafone customers, and phones like the BlackBerry Storm and the Apple iPhone in the hands of customers who are on 3’s mobile network.
The new company will create a network with six million customers, and estimated total revenues for $4 billion for the financial year, ending on 30 June 2008. Its mobile network will give 95 percent of the population access to its services, and 63 percent of the population access to its 3G network, but this will be increased to 95 percent.
The company’s chairman will be Vodafone Australia’s CEO Nick Read, while the CEO for VHA will be taken up by Nigel Dews, the CEO of Hutchison. The CFO role will be taken by current CFO of Vodafone, Dave Boorman; while the CEO of Vodafone, Russell Hewitt, will be given a non-executive Director role in the new merged company.
The deal is expected to close by the middle of 2009, subject to approval and clearance by the Foreign Investment Review Board, the Australian Competition and Consumer Commission and shareholders of Hutchison Telecommunications.
Hutchison shares rose up by 8.7 percent, to close at 12.5 cents.