Telstra, TPG won’t appeal blocked regional deal

The telcos are leaving the door ajar for a revised version of their 10-year, $1.8bn network tie-up, with regulatory reform also on the table.

Telcos Telstra and TPG will not seek a judicial review of the competition tribunal’s decision to block their proposed 10-year $1.8bn regional network sharing deal.

The competition tribunal in June sided with the ACCC in its decision to block the deal, which would have consolidated Telstra and TPG’s regional mobile networks in a $1.8bn agreement and reshaped the nation’s telecommunications sector.

In its decision, the ACT said that the proposed transaction, that would have affected some 17 per cent of Australia’s population, was likely to limit TPG’s ability and incentives to compete strongly with Telstra, and would likely negatively impact the likelihood of Optus to further roll out 5G across the nation, ultimately reducing competition.

Telstra and TPG said on Monday they would not appeal the ACT’s ruling.

“Telstra has now considered the judgement and will not be appealing the decision,” it told investors on Monday, ahead of its full-year results on Thursday.

TPG also told its investors it would not be appealing.

“TPG Telecom will continue to explore commercial options to expand its mobile network, which currently reaches 96 per cent of Australia’s population, and will advocate for sensible policy reform for improved connectivity in regional Australia.”

Telstra and TPG rival Optus had lobbied heavily against the deal, and its chief executive Kelly Bayer Rosmarin said it was “a good outcome” that the tribunal blocked what the nation’s second-largest telco considered to be an “anticompetitive arrangement”.

TPG boss Inaki Berroeta.

“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,” Ms Bayer Rosmarin said in June.

The competition watchdog has encouraged TPG to enter negotiations with Optus, with ACCC commissioner Liza Carver telling The Australian in December that rural Australians could benefit from strengthened competition in 5G.

“We see strong economic incentives for TPG and Optus to collaborate in continuing to roll out a second 5G network into regional Australia,” Ms Carver said in December, while Optus vice president of regulatory and public affairs Andrew Sheridan said collaboration between the two smaller telcos would “make sense” and that “there’s every opportunity for some form of sharing arrangement to be negotiated in the future.”

However, TPG has poured cold water on any potential deal, ruling it out in a submission to the ACCC in November. The ACCC has long wanted more – not fewer – mobile players, and unsuccessfully tried to block the $15bn merger between Vodafone and TPG in 2019 in a battle that ended up in the Federal Court.

As reported by The Australian, the door now remains open ever so slightly on a potential rejigged deal between Telstra and TPG.

ACCC chair Gina Cass-Gottlieb. Picture: Christian Gilles/NCA NewsWire

Both operators may renegotiate the stalled $1.8bn deal, The Australian reported, in a way that could take the network venture forward without running into competition hurdles.

Key areas that the tribunal believed should be reconsidered include the level of holdings of spectrum licences that TPG was prepared to fold into the mobile network deal. Also, there could be some room around the 169 TPG mobile towers that Telstra was set to gain control of under the agreement, The Australian reported.

Any new proposal would still need to go through regulatory scrutiny and another likely protest from Optus, however.

A review of Australia’s telecommunications regulations is also now likely, according to telecommunications industry analyst Paul Budde.

“I am certain that as a result of the Telstra-TPG action, the industry and the ACCC will have to sit down and work out a new regulatory system that takes the reality into account that the future of telecoms competition will be played out on the services side of the market and less so on the infrastructure side,” he said.

“Based on such a new regime, the industry could end up with a better foundation on which to develop projects such as the Telstra-TPG merger.”