Hutchison and Vodafone to merge Australian operation

Stuart Corner
Monday, 09 February 2009 03:02

IT Industry - Deals

Hutchison and Vodafone are to merge their Australian operations into a 50:50 joint venture, to be named VHA Pty Ltd, which will operate under the Vodafone brand. VHA will market its products and services under the Vodafone brand, for which it will pay Vodafone one percent of service revenues, but will retain exclusive rights to use the 3 brand in Australia during a transition period and beyond. To equalise the value difference between the respective businesses, Vodafone will receive a deferred payment of $A500 million from VHA.

The transaction is expected to close by mid-2009, subject to the approval of the Foreign Investment Review Board, clearance from the ACCC and HTAL shareholders' approval.

The deal will create a stronger mobile operator better able to compete with Optus, and particularly with Telstra's Next G service.
It will have approximately six million customers and combined total revenues of approximately $A4 billion for the twelve months ended 30 June 2008. Initially it will serve at least 95 percent of the population of which 63 percent will have access to 3G services. Plans are in hand to increase 3G coverage to 95 percent.
The net present value of operating expense and capital expenditure synergies is currently expected to be in excess of $A2 billion, net of integration costs.

Vittorio Colao, global CEO of Vodafone, said: "This transaction will benefit customers in Australia as it creates a company with the necessary scale to compete strongly in the mobile market.

The chairman of VHA will be Nick Read (CEO of Vodafone Asia-Pacific & Middle East Region), CEO will be Nigel Dews (currently CEO Hutchison Australia) and the CFO will be Dave Boorman (currently CFO of Vodafone Australia). Russell Hewitt (currently CEO of Vodafone Australia) will be a non-executive director of VHA.

The $A500 million deferred payment will be structured as a shareholder loan from Vodafone to VHA and take precedence over any shareholder returns and over the repayment of interest and principal of any other VHA indebtedness. it is expected to be repaid or refinanced within 18 months from completion.