More to TPG thinking than just Huawei

New Suncorp chief Steve Johnston. Illustration: John Spooner

When TPG boss David Teoh fronts the Federal Court on Wednesday, he will say he has no plans to roll out a fourth mobile network. But the question is: “Why not?”

The official response is that it’s because the federal government banned Huawei. Given Teoh has used the Chinese equipment supplier before, he was stuck, and it was too hard to change, or so the ­argument goes.

That, of course, is rubbish.

Maybe Teoh stopped rolling out his network because he saw the upside of jumping into bed with Inaki Berroeta at Vodafone, who already has a strong mobile network.

If Teoh wants to stay in the tele­coms game he has to have some sort of mobile coverage.

One argument on his side says his game is really about fixed-line competition and an NBN bypass service to save you the $44-a-line access fee, which explains his rollout plans.

Maybe. But mobility is the ­future of telecoms and, as Telstra’s Andy Penn will tell you, it’s all about 5G. The fact is that Teoh has been drinking that same Kool-Aid for a few years now.

It’s obvious Teoh agrees with Penn because he has talked up his plans for five years or more and spent at least $1bn buying spectrum.

Then there is the question of scale and how extensive a network Teoh had planned and how much platform-sharing may be ­involved.

He is also a late-entrant mobile player in Singapore, up against the behemoths such as Optus’s parent, Singapore Telecom.

But Teoh has spent a lifetime making money cleaning up around ­behemoths.

He has started rolling out the same small-cell network on which 5G is based, so clearly ­intended to roll out mobiles, at least until he and Berroeta started talking

He is not really a big legacy ­mobile player so it is actually easier for him to start now with a new provider because he doesn’t have billions of dollars of rival equipment across the country.

Optus is a big legacy player that was hitched to Huawei’s position, but when the ban came in, it talked to Ericsson and Nokia and now has 200 5G-based stations installed with plans to have 1000 up and running by March.

The TPG Huawei ban argument doesn’t stack up against the evidence. So what is the real reason why Teoh has changed tack?

He has the desire to get into mobiles. He and everyone else in the industry thinks being an NBN reseller is a road to likely financial ruin, so clearly he has to have other plans if he wants to stay in the industry.

There are alternatives like network sharing that don’t involve outright mergers.

TPG is an excellent competitor in a market dominated by Telstra, which prices at a margin above the baseline. If the baseline is high then Telstra simply adds its margin and sells at baseline plus x per cent. If TPG had 10 per cent of the big city market then the baseline would be lower, which means Telstra’s price would be lower and consumers would get cheaper ­mobiles.

That tells you the merger and TPG’s potential withdrawal has some impact on the market. It’s just a question of how big.

Vodafone has yet to report a profit in Australia. It has parents with deep pockets but arguably conflicting time horizons, so its motivation to merge is clear

The Teoh camp has briefed far and wide on the Huawei ban and Teoh’s non-entry into mobiles because of the government decision.

There is a little more to it than that, so now with the case due to start on Tuesday, we will see what Justice John Middleton thinks.

Power to consumers

On Wednesday a team of 30 chief executives from the Customer Owned Banking Association will descend on Canberra to plead ­recognition when the rules stemming from the royal commission are written.

The smaller finance houses want the politicians to apply a principle of proportionate duty in working out how to redraw the rules. In other words, hit the big guys who had all the snafus.

The group also wants added competition through more power to consumers and a focus on the regulatory impact of competition.

Good PR climate

Macquarie Bank chief Shemara Wikramanayake will be waving the flag as one of the members of the Global Commission on Adaptation, which releases its ­report on Tuesday ahead of the September 23 United Nations Climate Change Summit.

The commission is led by former UN chief Ban Ki-moon, Bill Gates and World Bank boss Kristalina Georgieva, and Wikramanayake is one of 31 commissioners from around the world working to get responses to climate change.

Macquarie Bank is a major player in climate change financing and membership of the commission puts her in a global group looking for solutions.

The commission noted that $US6.9 trillion ($10 trillion) a year in infrastructure investment was needed by 2030 to meet the Paris Agreement timetable.

By that year another 122 million people may live in extreme poverty as a result of climate change, it said.

The commission was established last year to manage the ­impact of climate change through technology planning and investment. It includes 17 convening countries including China, Canada and Britain.

From Macquarie’s perspective, it makes good business sense to be involved at such high levels ­irrespective of the obvious interest in the solutions.

Popular local choice

Suncorp chairwoman Christine McLoughlin has made the right choice by appointing Steve Johnston as the first Queenslander to run the state’s biggest company.

His appointment will be well received in the market because Johnston is well known and highly regarded from his days as chief ­financial officer, and before that in investor relations, since joining the bank in 2006.

The timing is perfect in the middle of the first bushfires for the season, which directly hit Suncorp’s customers.

Johnston has made clear he wants the bank and insurance company to operate better, and if they do then the numbers will look after themselves.

Suncorp was created in 1996 when the Queensland government-owned insurance company merged with Metway Bank to ­become the fifth-largest listed ­financial services company.

The combination of an insurer and bank has at times resulted in attempts to push the so-called bancassurance model, under which it would become a one-stop financial shop.

Johnston, who was born and bred in Queensland and joined the company from Telstra, will ­receive $300,000 worth of stock in May next year for filling in as acting boss when Michael Cameron stood down in May.

He will also be paid $1.8m in turn-up-to-work pay and up to the same again for both short and long-term incentives, bringing his potential pay to $5.4m.

Following the financial services royal commission, the board has done the right thing in sticking with an insider because now is not the time for a revolution at Suncorp.