Telstra deal ‘crucial for us to compete’: TPG boss Inaki Berroeta
Redacted witness statements from top telco executives have shed new light on the industry’s most contentious deal.
The nation’s third-largest telco, TPG, would not be able to viably compete with its rivals across regional Australia if its proposed network sharing deal with Telstra is axed by the competition watchdog, chief executive Inaki Berroeta has warned the regulator in a redacted witness statement.
The contentious $1.8bn deal, in which TPG and Telstra will merge their tower capabilities across the regions, is likely to result in TPG leapfrogging Optus to become the nation’s second-largest mobile operator if the Australian Competition & Consumer Commission gives it the go-ahead.
In his highly redacted witness statement to the ACCC, Mr Berroeta said the increase in TPG’s coverage would boost mobile network provider choice in regional Australia and allow it to vigorously compete with Optus and Telstra for consumer, enterprise and wholesale customers.
“The proposed transaction aligns with TPG’s ambitions for regional Australia and will enable TPG to deliver regional coverage that rivals its competitors within a time frame and in a manner not otherwise commercially viable for or available to TPG,” he said.
Mr Berroeta said the network sharing agreement would also result in higher-quality coverage and expedite 4G and 5G availability into areas where TPG currently only offered 3G. The deal, if approved, would give TPG and its brands including Vodafone and iiNet access to five times the number of mobile sites it currently had in rural and regional areas.
“The proposed transaction provides TPG with access to 5G in the 17 per cent regional coverage zone a number of years earlier than it would otherwise be able to deploy such technology itself,” he wrote in the statement.
There are three possible alternatives to the proposed transaction, according to Mr Berroeta: that TPG enters a wholesale agreement with Optus to extend its coverage; a targeted expansion of TPG’s own network in the region; or a more wide-scale national expansion its own network to seek to match Telstra or Optus’s coverage. However, he said a deal with Optus would be inferior to TPG’s agreement with Telstra.
“I am of the view that TPG has no financial case to sustain a full build in regional and rural areas,” Mr Berroeta said. “The proposed transaction will provide TPG with regional 5G coverage in a much shorter period of time than under any alternative agreement with Optus due to Optus’s need to upgrade its sites to 5G.”
The proposal has drawn sharp criticism from other telcos – in particular Singtel-owned Optus.
“The former Telstra CEO’s witness statement indicates that the proposed arrangement will allow Telstra to invest less in regional Australia,” Optus vice-president of regulatory affairs Andrew Sheridan said. “Our regions need more investment, and regional Australia will be worse off if this regional network merger is allowed to proceed.”
Former NSW premier Gladys Berejiklian, now an Optus executive, has called it a “backwards step for millions of Australians”.
“We’re extremely concerned that that would be a backward step to an industry which needs more competition,” she said in an earlier interview. “It’s called a shared proposal, but in effect it’s a merger. When you strengthen the position of a dominant incumbent, and disincentivise organisations from making future capital investments, that’s not a good thing. And that has the adverse impact of providing less resilience in the network.”
Brian Han, an equities analyst at Morningstar, said: “Just because you share infrastructure it doesn’t mean you can’t have robust price competition at the consumer end.
But former competition chief Rod Sims has publicly warned of potential significant price rises as a result of the TPG and Telstra network sharing deal, saying the arrangement may lead to a less competitive telco environment and higher prices for consumers as a result.
“TPG is a big player in the cities, and there are a lot of people on TPG who aren’t actually travelling out of their city, and not going into regional areas much at all. So they benefit from getting a lower price, and not having to pay a much higher price for something they may not value,” he said earlier this year.
“The concern is that to the extent TPG looks a lot like the other two players, then they might start pricing like them as well.”
Nationals leader David Littleproud has also previously said the proposed tie-up in his view would leave rural communities worse off if approved. “We are seeing this cancer that is Telstra spread into peri-urban areas as well, in that they have continued to take away much of the investment and maintenance, particularly with mobile phone towers, and effectively let them slide away despite the investment by the Coalition government in the mobile … black spot areas,” he said in June.
The ACCC has until December 2 to make its decision.
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