Setback for TPG as competition tribunal blocks $1.8b landmark deal with Telstra

Vodafone owner TPG Telecom has suffered a blow in its plan to expand its market share in regional Australia after a landmark $1.8 billion deal to share infrastructure with Telstra was blocked by competition authorities.

The Australian Competition Tribunal on Wednesday declined to authorise a deal that would have let TPG use Telstra’s towers in regional Australia, upholding a previous decision from the Australian Competition and Consumer Commission in December.

A planned infrastructure deal between Telstra and TPG has been rejected by the Australian Competition Tribunal.Credit: Pat Scala, Rob Homer

Optus, which had opposed the deal on the basis it would further bolster Telstra’s power, hailed the decision as a win for competition.

While Telstra shares were little changed, TPG shares plunged 5.4 per cent. The company must now decide whether to further appeal the ruling or consider a different strategy for lifting its market share in the regions.

Morningstar analyst Brian Han said the decision may have scotched some investors’ hopes that TPG could build up its customer numbers in regional Australia, where its coverage is much poorer than Telstra’s. He said the deal could have also helped TPG pick up urban customers who value wider coverage outside the cities.

“I think it’s more of a sentiment hit. It removes the regional upside for TPG longer term,” Han said.

Under the planned deal, TPG would have given Telstra access to its spectrum, in exchange for being able to use Telstra’s towers in regional Australia.

In its decision, the tribunal found the deal would give Telstra “substantial commercial and competitive benefits and would further increase Telstra’s position of market strength in mobile telecommunications markets”.

The proposed deal would also weaken Optus’ incentive to invest in 5G technology, it said.

TPG and Telstra both protested that the decision was a setback for mobile coverage in regional Australia. TPG said that if the network sharing arrangement did not ultimately proceed it may need to increase its capital expenditure on its existing regional network.

Optus chief executive Kelly Bayer Rosmarin says the tribunal’s decision is an important win for her company.Credit: Michael Quelch

TPG chief executive Inaki Berroeta said the company was not “giving up regional Australia” and it would consider its options. These could include pursuing a judicial review in the Federal Court, or trying to re-jig the planned deal with Telstra.

“This determination entrenches the status quo for mobile coverage in regional Australia,” Berroeta said. “We remain committed to extending the reach and capability of our mobile network to regional Australia and will continue to explore our options to deliver great mobile service and value to our customers.”

TPG, which argues it does not stack up financially for it to build more of its own towers, had hoped to increase its regional mobile network sites fivefold by using an extra 3,700 mobile sites from Telstra under the deal.

Telstra chief executive Vicky Brady said the tribunal’s decision was disappointing and argued it was not always commercially viable for telcos to invest in more towers to add capacity in regional Australia. She also pushed for policy changes on access to spectrum: currently there are limits on how much spectrum telcos can buy at auction.

“As we consider this outcome, we are also calling for a rethink of policy on spectrum access in light of the ever-increasing demand for mobile data,” Brady said.

Optus chief executive Kelly Bayer Rosmarin welcomed the ruling, saying it was blocking an “anti-competitive arrangement” and that the decision underlined the importance of “infrastructure-based competition”.

“This is a good outcome for our regional communities as it will mean they will continue to benefit from competition as Optus reaffirms its commitment to providing Australia’s regional communities with a strong network and great service,” Rosmarin said.

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