(Reuters) - Australia's competition regulator on Thursday expressed preliminary concerns about the proposed merger between TPG Telecom Ltd <TPM.AX> and Vodafone Group's <VOD.L> Australian business.
The Australian Competition and Consumer Commission (ACCC) said in a statement that removing TPG as a new independent competitor with its own network "would be likely to result in a substantial lessening of competition".
"A mobile market with three major players rather than four is likely to lead to higher prices and less innovative plans for mobile customers,” ACCC Chairman Rod Sims said in the statement.
"If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy."
In August this year, TPG Telecom agreed to a merger with Vodafone Group's business Down Under, in a bid to ease competition in the cutthroat sector and to take on bigger rivals Telstra Corp Ltd <TLS.AX> and Optus.
The planned merger combines Australia's third- and fourth-largest telecom firms into a larger third player holding TPG's fibre network and Vodafone's mobile system.
The tie-up, to be called TPG, came as Australia's telecom sector faces upheaval from the rollout of a government-owned broadband wholesaler, which has dented internet profitability and driven intense price competition in the mobile market.
The ACCC said it would consider the longer-term impact of the proposed merger, especially after the rollout of 5G technology and would also closely examine the likely impact of removing Vodafone, currently a minority player in the fixed broadband market, as a competitor.
A final decision is scheduled for March 28, 2019, said ACCC.
In separate statements, TPG and Vodafone Hutchison Australia expressed confidence that their merger proposal would obtain the required regulatory approvals.
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Phil Berlowitz and Matthew Lewis)