Telco TPG is ceasing the rollout of its mobile network, which would have been a fourth competitor in the Australian mobile phone market.
- TPG says the Federal Government’s ban on Huawei 5G equipment makes its mobile network rollout unviable
- The telco says it already spent $100m on the network rollout with a further $30m locked in
- Analyst Paul Budde believes the decision is a ploy to overcome the competition regulator’s objections to TPG’s planned merger with Vodafone
In an announcement to the stock exchange, TPG said it was using Huawei equipment for the network as there was a simple path to upgrade it to 5G — the next generation of mobile network that promises much faster internet speeds.
However, it said the Federal Government’s decision to ban the use of Huawei equipment for the rollout of 5G mobile infrastructure last year derailed its plans.
The company said it had explored possible solutions but decided it did not make “commercial sense” to pump any more money into “a network that cannot be upgraded to 5G”.
“It is extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control,” the company’s chairman David Teoh said.
Huawei Australia also expressed disappointment at the decision.
“As predicted, the Australian’s Government’s 5G ban on Huawei will lead to reduced competition and higher prices for Australia consumers and businesses,” it said in a statement.
“It is not just higher prices, Australians will miss out on the competition that drives technology innovation.”
A spokesperson for the government said it recognises the opportunities 5G networks present.
“While the Government wants to realise the full benefits of 5G, we need to ensure that Australian’s information and communications is protected at all times,” they said.
Analyst says decision was ‘easy way out’ for TPG, Vodafone
The Australian Competition and Consumer Commission (ACCC) is currently assessing a proposed merger between TPG and Vodafone and had signalled it could block the deal due to concerns it might reduce competition by removing a potential fourth mobile network from the market.
Independent telecommunications analyst Paul Budde told the ABC TPG’s decision likely has more to do with the merger.
“It’s an easy way out for TPG to abandon now its mobile plans, and obviously save themselves billions of dollars, because of the proposed merger,” said Mr Budde.
While Mr Budde said the Federal Government’s ban was a major setback for TPG and other Australian telcos, as Huawei is cheaper than other equipment providers, he described it as a “convenient situation” for TPG and Vodafone.
“I can see that [the Huawei ban] plays a role but, at the same time, the overarching situation with TPG and Vodafone having two networks, I think that’s an easy way out for them to now go to simply one network,” he said.
“It’s really a sad day for competition because you’re left with the three players who are not overly interested to compete with each other very vigorously, so that is sad for the Australian market.
The ACCC’s chairman Rod Sims told the ABC any changes to business strategy made during a merger assessment process need to be “looked at extremely closely and rigorously tested”.
“You have to give more weight to documents that illustrate intentions before the merger was contemplated — you give more weight to those documents than you do to documents that occur once the merger’s been announced, that’s just standard practice,” he said.
Regardless of TPG’s announcement, Mr Sims said the regulator needed to assess the telcos’ longer term strategies.
“This is a fast-moving market and we need to think through how TPG and, indeed, Vodafone’s strategies can evolve, and would evolve, with or without the merger, in the context of a market where fixed-line, which TPG’s very strong in, and mobile, which Vodafone’s very strong in, converge,” he said.
TPG yet to decide on what to do with its spectrum
TPG said it had spent $100 million on the network rollout to date and another $30 million in capital expenditure has already been committed.
The telco spent $1.26 billion on 4G spectrum in April 2017 and on Tuesday said it was not in a position to announce what it would do with that holding.
“Obviously the first situation would be to look at Vodafone and see where that fits in, if they can use it, and then if there is any surplus they will be able to sell that on the private market to other mobile operators,” said Mr Budde.
“I don’t think that’s a problem — there is simply never enough spectrum, it’s a very valuable asset.”
Telstra shareholders seemed to welcome the news of one less potential competitor in the mobile market — shares in Australia’s largest telco closed 7.8 per cent higher at $3.19.
TPG shares also gained ground, ending 3 per cent higher after reversing initial falls, while shares in Vodafone Australia part-owner Hutchison Telecommunications fell 4.2 per cent.