TPG Telecom Ltd (ASX: TPM) confirmed this morning that it has engaged with “exploratory discussions” with Hutchison Telecommunications (Aus) Ltd (ASX: VHA), the operator of Vodafone Australia, about the potential of a merger between equals of the two companies.

TPG already owns 50% of Hutchison Telecommunications and currently uses its network to wholesale TPG mobile services.

David Teoh’s TPG has made a number of large moves in recent years to expand the business. It acquired iiNet, AAPT and Intrapower in recent years. It is also investing heavily in building its own mobile networks in Australian capital cities and Singapore.

TPG made a disclaimer to the market that there is no certainty any transaction will eventuate or what the terms of the transaction would be.

Companies often point to ‘synergies’ as a reason to make large mergers, such as the recent CYBG Plc (ASX: CYB) and Virgin Money Holdings (UK) PLC (LON: VM) tie-up. The combined business would only need to construct one national 5G network instead of two.

However, such a large deal of two major players could come under the scrutiny of the Australian Competition and Consumer Commission (ACCC).

The TPG share price is nearly 15% and Hutchison Telecommunications’ share price is up 30% in response to this news.

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