By Byron Kaye

SYDNEY (Reuters) - An Australian court approved a A$15 billion ($10.1 billion) merger between a unit of Britain's Vodafone Group <VOD.L> and internet provider TPG Telecom <TPM.AX> on Thursday, overruling a regulator and enabling a huge rival to the country's top telcos.

A Federal Court judge said a tie-up between Vodafone's joint venture with local telco Hutchison Telecommunications (Australia) Ltd <HTA.AX> and TPG would not harm competition, rejecting the Australian Competition and Consumer Commission's (ACCC) reason for blocking the deal last year.

The ruling revives a plan to challenge the dominance of Telstra Corp Ltd <TLS.AX> and Singapore Telecommunications's <STEL.SI> Optus in the Australian market by giving TPG, an internet company, and Vodafone, a mobile phone company, access to each other's sizeable nationwide networks.

The regulator has a month to lodge an appeal.

TPG had been looking for a way into the highly-anticipated 5G mobile market - where Vodafone is gearing up to compete - after halting construction of its own network due to an Australian ban on parts supplied by China's Huawei Industries.

"This merger...gives a lot more certainty that there will be a strong 5G player in the market. We have confirmation we'll have three 5G players," Vodafone Hutchison Australia CEO Iñaki Berroeta said on a call with analysts.

TPG founder and Executive Chairman David Teoh said in a statement the company was "very pleased with the Federal Court decision" although it still needed shareholder and other regulatory approvals.

Shares of Hutchison surged as much as a quarter, while TPG shares gained 11%. Shares of Telstra, which dominates the Australian mobile and internet markets, had risen earlier on Thursday after it released its half-year earnings but fell up to 2.4% after the court ruling. SingTel's Singapore-listed shares were down 1.2%.

The ruling was "consistent with our expectations and we'd already factored in a successful merger", Credit Suisse analysts said in a note.

REGULATOR REBUFF

The ruling is a blow to the ACCC which has had decisions to block some of the country's biggest M&A deals of recent years overturned by courts, including the TPG-Vodafone deal.

"Australian consumers have lost a once-in-a-generation opportunity for stronger competition and cheaper mobile telecommunications services with this merger now allowed to proceed," ACCC Chairman Rod Sims said in a statement.

Sims added the regulator was considering the judgment.