MELBOURNE (Reuters) - Australia’s antitrust regulator has hurt competition by blocking a A$15 billion ($10 billion) merger between the nation’s third- and fourth-largest telecoms providers, the companies said in court on Tuesday as their legal appeal got underway.

FILE PHOTO: The logo of Australia's TPG Telecom Ltd can be seen outside their head office in Sydney, Australia, April 12, 2017. REUTERS/David Gray/File Photo

The Australian Competition and Consumer Commission (ACCC) opposed in May a combination of TPG Telecom Ltd and the local joint venture of Britain’s Vodafone Group PLC on the grounds it would eliminate a potential fourth mobile network competitor.

A coming together of the companies would actually encourage competition but “the pro-competitive effects of this merger are imperiled by the ACCC’s opposition to it”, Vodafone lawyer Peter Brereton said.

The commission’s main argument is that consumers will benefit more if TPG builds a fourth mobile network than if it merged with Vodafone Hutchison Australia, but TPG argues it has abandoned plans to build a new network.

Vodafone runs a mobile phone network with Hutchison Telecommunications (Australia) Ltd.

TPG had planned to build a 4G mobile network to rival Vodafone’s but scrapped it last year due to economic and technical factors and a government ban on gear supplied by its preferred vendor, China’s Huawei Technologies.

TPG’s barrister Ruth Higgins told the Federal Court competition conditions have “changed materially” since TPG began a plan to roll out a mobile network in mid-2016, and “that opportunity has been lost”.

Without Huawei equipment, TPG could no longer justify spending shareholders’ funds on a new network, in the face of rivals’ 5G high speed networks, falling revenue per user and rising investment costs to deliver more data, Higgins said.

The ACCC’s lawyer Michael Hodge said the regulator believed TPG could take on the country’s largest telcos, Telstra Corp and Singapore Telecommunications’ Optus, even without the Huawei parts.

“The prospect of snuffing out the only potential new entrant to the mobile market in Australia is a significant blow to competition,” Hodge told the court.

The ACCC also questioned how strong a competitor the merged group would be to the top telcos within the next three years and challenged the claim TPG could not build its network without the Huawei equipment.

The hearing continues for the next several weeks, with company executives and industry experts due to testify.