Vodafone and Hutchison merge their Australian businesses

That said, some analysts are opining that the move may be the opening gambit in a complex strategy by Hutchison to get out of 3G in Australia altogether. They cite as evidence for this the fact that the new company will operate exclusively under the Vodafone name and the Hutchison "3" brand will simply disappear.

The merger is one of almost equals and is to be a 50:50 joint venture that will be in place and competing against Telstra and Optus by the middle of this year. The new entity will have some six million subscribers (giving it an instant market share of 27 per cent) and annual revenues in the region of four billion Australian dollars. Interestingly though, the agreement calls for Hutchison to pay Vodafone the deferred  sum of A$500 million "in recognition of the difference in value between the two companies."

According to its last annual report, Hutchison had an EBITDA of A$173 million as at June 30 last year whilst Vodafone posted an EBITDA of A$499 million as at March 30, 2008. In a statement issued this morning the two operators say that the economies of scales resultant on the merger will save them A$2 billion a year in capital and operating expenditures.

Another part of the rationale behind the merger is that 3 is strong in postpaid customers and revenues and has a leading market position in non-voice, data-based applications and services whilst Vodafone's prepaid offerings are very popular with Australian consumers.

According to both Vodafone and Hutchison, Telstra and Optus will have difficulties in combatting the merged company, not least because the latter two carriers are not pure-play mobile operators and will thus struggle to compete against the new company as they will have also to focus on diversified, non-mobile interests and subscribers.

That's the idea anyway and if you take this morning's press releases at face value, it's all going to be so easy. But of course, and as usual, things are a bit more complex than Vodafone and Hutchison would seem to want us to think.

To begin with, Vodafone has an extant, legally-binding joint venture agreement in place with Optus whilst Hutchison has a roaming agreement with Australian operator Telstra. Both Vodafone and Hutchison say that these agreements will stay an place and it will be business as usual - for now. However, somewhere down the line exits will have to be made, and they could be costly.

Then there's the little matter of the merged company having to persuade its subscribers of the benefits of the marriage and convincing them not to churn away to either Telstra or Optus.

Australia is a huge country with a predominantly heavily-urbanised population of just 21 million people (as at July 2008) sited in a few cities strung-out around the coasts and on the edge of the vast empty centre. As such, the existence of five telcos has long seemed a bit over the top and, given the current dire economic climate, consolidation is considered overdue and desirable.

Now it has started and Hutchison and Vodafone are taking a major gamble at a very difficult time. But then, necessity is always the mother of invention.