Vodafone, Optus vow to end Telstra’s ‘tax’ with $1.6bn network sharing deal
Vodafone says Australians have been paying too much for mobile phone plans but its $1.6bn network sharing deal with Optus will change that and challenge Telstra.
Business
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TPG chief executive Iñaki Berroeta has declared the telco’s $1.6bn network sharing deal with Optus will end the “bush tax” that he says bigger rival Telstra is inflicting on regional Australians.
The blockbuster agreement will go live on Thursday, which Mr Berroeta says will more than double the coverage of TPG’s flagship Vodafone brand “overnight”. It will now be able to service about 98.4 per cent of the population.
“For customers this is all about great coverage at great prices. For our business, it’s about significantly increasing our addressable market overnight,” Mr Berroeta said.
“We have a very strong presence in metro Australia with Sydney sitting at about 30 per cent market share, and the other capital cities at close to 20 per cent. However, in regional areas, our market share is in the single digits.
“By more than doubling our mobile coverage across Australia, we are creating a significant opportunity to compete hard with the other mobile players and replicate our city market share in regional Australia.”
Under the agreement, Optus will receive about three-quarters of the $1.6bn sum – totalling $1.19bn – which will be put towards accelerating Optus’s 5G rollout across the country. In return, TPG will increase its coverage from 400,000sq km to more than 1,000,000sq km.
Mr Berroeta said it allowed a third mobile carrier to enter the market at scale, and while he took aim at Telstra he also said it would intensify competition with TPG’s network sharing partner Optus.
“We have heard loud and clear from Australians that they are fed up with having to pay a premium for regional mobile coverage. It’s a bush tax and we want to end it.
“We want to shake up the mobile duopoly that’s existed for too long in regional Australia and bring the choice and great value of Vodafone’s award-winning value and service to the bush.”
Telstra’s base sim-only mobile plan costs $65 a month for 50GB of data – more than 24 per cent higher than Vodafone’s offering for the same amount of data. TPG has also been undercutting Telstra via its budget offshoot Felix Mobile, with half-price plans. Optus’s base sim plan is also cheaper, costing $62 a month for 180GB of data.
Telstra argues that it charges high prices because it’s expensive to run its network and it needs to fund an explosion of data use across the country.
Although it will double TPG’s network overnight and the telco offers cheaper prices, Mr Berrotea did not expect it to become an “overnight success story”.
“We know we need to work hard to win customers’ trust and belief in us. But by switching on our regional network sharing arrangement, and simplifying our business through our IT transformation project, we are setting in place the tools we need to succeed.”
Optus managing director for customer solutions, Anthony Shiner, who joined the telco late last year from Airtel Africa, expected the network sharing deal to increase competition not just in regional Australia but also metropolitan areas.
“Their (Telstra’s) pricing is consistent in metro and rural. I’m not sure it’s a bush tax, you could argue that it’s a city tax as well,” Mr Shiner said.
“We were born on the back of being a competitor and driving competition. We have a material value proposition compared to Telstra both rural and in the city.
“Anytime you stir the market up and you get interest in that category, it forces everyone to pull up their socks and we look forward to continuing to do that.”
Mr Shiner also stressed that the network sharing deal wasn’t merely an “advertising campaign”, highlighting Optus’s presence in regional areas.
He also said the deal would accelerate Optus’s 5G rollout, allowing it to complete it two years ahead of schedule.
“It’s not an advertising campaign. It’s actually a community engagement model. One of the things that we have done with over 250-odd stores is the engagement with the local community, be it hiring staff, involvement during disasters etc. It is having feet on the ground really to support the community.
“Our long-term commitment over the last 30 years has been consistent and we look forward to that continuing.”
Originally published as Vodafone, Optus vow to end Telstra’s ‘tax’ with $1.6bn network sharing deal
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