* TPG-Vodafone deal set to shake up the telecom sector
* Big Four banks down; some of Westpac's gain on rate move pared
* NZ slips after hitting record high on Wednesday
By Nikhil Nainan
Aug 30 (Reuters) - Australian shares rose on Thursday after TPG Telecom and Vodafone Group's local unit agreed to merge in a shake-up of the telecom sector, though weak financials trimmed the gains.
Telecom stocks boosted the S&P/ASX 200 index, up 0.2 percent, or 12.10 points to 6,364.3 at 0200 GMT. The index rose 0.8 percent rise on Wednesday.
The merger between TPG Telecom and Vodafone Group's local unit, Hutchison Telecommunications (Australia) would create an entity with an enterprise value of A$15 billion ($10.95 billion).
The deal will ramp up competition with bigger rivals like Telstra and Optus.
TPG shares soared over 22 percent as the top gainer on the index, while Vodafone's Hutchison, a joint venture with CK Hutchison Holdings Ltd, catapulted as much as 76 percent at one point. Telstra was up 2.4 percent.
"This is going to lead to a decrease in competition for Telstra and either way the market is embracing a sector that has been in the doghouse for a while," said James McGlew, executive director of corporate stockbroking at Argonaut.
"It just shows you how contrarian markets can be at times."
Financial stocks, which account for over one-third of the benchmark, were in the red.
Westpac Banking fell 0.6 percent, trimming some of its 2.7 percent surge on Wednesday after it became the first major lender to raise key mortgage rates in an effort to preserve profit margins.
Westpac's decision lays open the field for its 'Big Four' peers, which together control about 80 percent of Australia's deposit and home loan markets. The move also sparked speculation the central bank will be forced to keep policy accommodative to offset such rate increases.
A more than 1 percent rise in oil prices overnight saw Brent settle over $77 per barrel, its highest in seven weeks. However, drops in Santos and Origin Energy capped the gains.
Carnarvon Petroleum announced on Thursday that its Dorado oil find is estimated to hold 171 million barrels of light oil reserves, making it the third biggest oil find off Western Australia. 80 percent of the field is owned by Quadrant Energy, which is set to be taken over by Santos.
A day after hitting record highs, New Zealand's benchmark S&P/NZX 50 index slipped 0.2 percent to 9,342.96.
The stock market's operator, NZX Ltd, lost over 4 percent, while Spark New Zealand Ltd fell about 1 percent.
For more individual stocks activity click on (Reporting by Nikhil Kurian Nainan; Additional reporting by Aaron Saldanha in Bengaluru; Editing by Richard Borsuk)