Spark's stake in the Vodafone Australia-TPG merger controversy

An investment made two decades ago might finally be recouped. Photo / 123RF

Through an accident of history, Spark has sizeable financial stake in the outcome of Vodafone Australia and TPG Telecom's attempt at a A$10.9 billion merger, which is making headlines across the ditch.

The value of the Kiwi telco's 10 per cent stake in Hutchison Telecommunications Australia - which owns 50 per cent of Vodafone Australia - got hammered this week as HTA shares fell 28 per cent on news the ACCC had blocked the merger.

Shares in TPG (a homegrown company that bears no relation to the US private equity player with the same initials) finished Wednesday down 14 per cent.

Still, even after yesterday's dive, Spark's stake in the ASX-listed HTA is worth around $156m - a healthy gain on its carrying value in Spark's annual report last year ($66m).

And Spark's HTA stake, which has been worth more than $300m at times during its recent, merger hype-fueled run-up, could bounce again.

Vodafone Australia and TPG immediately said they would challenge the ACCC's decision in court. And a number of pundits think they have a good chance of overturning the regulator. After all, a combined Vodafone Australia-TPG would still be only third in the mobile market behind Telstra and Optus.

A quick rewind is useful at this point to see how we got to this curious state of events where Spark, effectively, has a stake in Vodafone Australia.

The saga began in 2001, when the company formerly known as Telecom paid A$250m for a minority stake in Hutchison Telecommunications Australia (HTA - or "Hutch Tel" as it's sometimes called in the biz), operator of the "3" mobile network of the time.

The idea was that Telcom and HTC could pool their efforts on 3G technology, which was, then, the Next Big Thing.

In the end, the technology partnership when nowhere Telecom kept its stake. As tech fell into funk during the 2000s, there were simply no buyers.

In 2009, HTA merged with Vodafone Australia in a 50:50 deal. The combined company is formally known as Vodafone Hutchison Australia but today trades as Vodafone Australia, having shuttered the "3" brand a while back. A complicated structure sees VHA still listed separately on the ASX.

Telecom offloaded various Aussie investments in the build up to the Chorus spin-off and its rebirth as Spark, but trading in HTA shares was too thin for any sale to be practical.

The carrying value of Spark's HTA stake is simply extrapolated from the stock's trading price on the ASX. But Spark investor relations lead Dean Werder says it's much harder to put a value on it in real terms given the tiny free float and what he describes as "very, very illiquid" trading.

Analysts have noted that if the deal goes head, there will be a two-year lock-in period before HTC could sell shares. Werder said the lockin would not necessarily apply to Spark, given it's a minority shareholder that has no influence on whether the deal goes ahead (Spark lost its HTC board seat in 2009 as the Vodafone Australia deal was consummated). He is seeking more clarity.

Werder also cautions there's no guarantee the stock will be any more liquid post deal, but he acknowledges Spark's stake could be more attractive as part of a larger entity.

So a healthy windfall for Spark is possible, should Vodafone Australia and TPG win their day in court.