TPG Telecom in talks to sell $4bn-plus fibre assets to Vocus Group after Vision Networks sale stumbles

TPG Telecom is in talks to sell its fibre assets to Macquarie Group’s Vocus. Picture: iStock

TPG Telecom is set to sell its fibre assets to Vocus Group for at least $4bn after attempts to sell its Vision Networks business to the Macquarie-backed telco were unsuccessful.

It comes after DataRoom revealed last year that a sale of the assets was on the agenda, with the Australian listed telco potentially looking at a full-blown demerger of its infrastructure assets.

This column understands that negotiations still have some way to play out and a deal is not imminent.

Working on the transaction is Bank of America, as investment banks UBS and Macquarie Capital aid Vocus, in a tie up that could take the value of the latter to around $8bn to $9bn, say sources.

The thinking has always been that a sell down by TPG Telecom would address its funding challenges, with its net debt at $5.5bn at December.

Bank of America had earlier tried to sell a stake in TPG Telecom’s $1bn Vision Networks for TPG, but the sale process collapsed, say sources.

In the final stage of the process was understood to be Vocus’s parent, Macquarie, and Pacific Equity Partners, but that was in April, and the negotiations on that transaction were understood to have gone cold.

The business that connects the internet to homes consists of the assets from former telco provider Neighbourhood Cable, based in regional Victoria, and the TransACT network in Canberra.

TPG’s share price has been lagging since the internet and phone service provider merged with Vodafone Hutchison Australia in 2020, down about 30 per cent since the deal.

Aside from Telstra, TPG Telecom is considered to have the best fibre network in Australia, and while others are outdated TPG’s is state of the art, given the construction on the network it has recently carried out.

Macquarie purchased Vocus Group in 2021 with Aware Super for $3.5bn.

It comes after TPG Telecom appointed former investment banker Grant Dempsey as its chief financial officer in November.

Mr Dempsey was one of the prolific deal makers at JPMorgan when he had roles including head of investment banking for Australia and New Zealand before his departure in 2017 to join ANZ.

TPG Telecom embarked on a major restructure in December, where it reduced its 11 business units to seven, with fixed and mobile networks, IT and digital functions all merged together.

One of the largest shareholders in TPG is founder David Teoh, who sold a $335m interest in the business in December, taking his stake from about 17 per cent to close to 14 per cent.

Other telecoms groups have been separating out their fibre assets, including Telstra, which has placed the assets in its new stand-alone unit called InfraCo, with the expectation that they will eventually be sold.

In September, Telstra sold a 49 per cent interest in its telecoms towers to The Future Fund and Morrison & Co in a transaction that valued the business at $5.9bn.

The unit was renamed Amplitel and sold for 28 times its earnings, the same multiple as the sale of towers by rival Optus to AustralianSuper.

Also forming part of Telstra’s InfraCo are its data centres, exchanges, mobile tower assets ducts and pipes.

It comes as telecoms infrastructure assets remain in strong demand from buyers.

AustralianSuper last year agreed to pay Singtel’s Optus $1.9bn to own 70 per cent of its telecoms towers, with the business now called Australian Tower Network.

The country’s largest superannuation fund also purchased telco tower owner Axicom from Macquarie.