3, Vodafone to merge in 50-50 joint venture

Vodafone has announced it will form a 50-50 joint venture company with rival mobile carrier Hutchison Whampoa, owner of the “3” brand, and offer services under the new name VHA.

VHA will market its products and services under the Vodafone brand, but will retain exclusive rights to use the 3 brand in Australia “during a transition period and thereafter”, according to the companies.

Vodafone will receive a deferred payment of $500 million from VHA to “equalise the value difference between the respective businesses”.

The new company is expected to provide mobile coverage to around 95 percent of population.

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

“Customers can look forward to a wider portfolio of voice and data services,” Colao said. “This is an important step in the transformation of the Australian mobile industry.”

VHA will have some 6 million customers and the combined entity generated about $4 billion in revenue for the twelve months ended 30 June, 2008.

Hutchison CEO Nigel Dews will be CEO of VHA and Vodafone Asia Pacific CEO Nick Read will be chairman.

Of the 95 percent population coverage for mobile services, 63 percent will have access to 3G services, but on completion of network roll-outs, this number is planned to increase to 95 percent.

The merger will consolidate operations across procurement, product development, IT support, networks, commercial operations and administrative expenses to deliver “significant cost savings”.

The net present value of operating expense and capital expenditure synergies is currently expected to be in excess of $2 billion.

If approved by the ACCC, Foreign Investment Review Board and shareholders, the merger is expected to close by mid-2009.