The Federal Court recently released the judgement in the TPG – Vodafone merger case and the Australian Competition and Consumer Commission has announced it will not appeal the decision. Three of the Frontier Economics team acted as expert witnesses in the case: two from Frontier Economics in Australia and one from Frontier Economics in London, with further support from other Frontier economists and econometricians.
Professor Stephen Gray gave evidence regarding TPG’s ability to access the equity capital markets. In particular, he provided evidence about how investors would be likely to view the risk of investing a capital raising and whether a capital raising could be executed. Justice Middleton accepted Professor Gray’s evidence about the likelihood of a capital raising (see paragraphs 462-466).
David Foster, from Frontier Economics in London, gave evidence about the extent of competition in a counterfactual world in which TPG does enter, and its relative competitiveness to the factual in which the merger occurs (see paragraph 482). While detail about this evidence was heavily redacted in the public version of Middleton J’s judgement, it accepted Foster’s evidence that there is a “real prospect” that the market is reduced to “2.5 operators” (see paragraph 483).
Warwick Davis provided an expert report to TPG but was not called upon to give evidence in court. His expert report covered 5G network modelling.
Middleton J pointed out in the opening paragraphs in his judgment that the “only question for this Court is whether the merger would have the effect, or be likely to have the effect, of substantially lessening competition in the supply of retail mobile services in Australia”. Ultimately, he was not satisfied that the ACCC’s argument that TPG would roll out a mobile network should it not merge with Vodafone, and then would become a viable competitor to the three players: Telstra, Optus and Vodafone, was correct. Rather, the judge decided that the merger of TPG and Vodafone would in fact create a stronger competitor for the two remaining mobile operators. This view was borne out in the initial market reaction to the news, as put forward by Warwick Davis and James Key.
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