TPG in multi-billion dollar fibre talks with rival Vocus

The telco’s chief executive Inaki Berroeta has been working to lighten its hefty debt load.

TPG chief executive officer Inaki Berroeta.

Shares in telco giant TPG have jumped after the company confirmed it has entered exclusive non-binding negotiations over a multibillion-dollar transaction with rival Vocus for TPG’s non-mobile fibre assets.

TPG entered a trading halt just after 1pm on Tuesday and its shares spiked by 11.5 per cent when they recommenced trade, their largest intraday jump ever, adding a billion dollars to telco’s valuation. The company said it had received a number of non-binding expressions of interest in its fixed network infrastructure assets, including its wholesale fibre business Vision Network, which pro­vides broadband access to about 400,000 Australian premises.

“As part of that process, Vocus Group made an indicative, highly conditional, non-binding offer to acquire certain of TPG’s Enterprise, Government and Wholesale assets and associated fixed infrastructure assets, including Vision Network, for approximately $6.3 billion,” TPG said on Tuesday. “The indicative offer is conditional upon a number of matters, including due diligence, debt financing, finalisation of transaction documentation, and approvals of the respective boards of TPG and Vocus Group.”

The telco said that after a board assessment of the offer, it granted Vocus a period of exclusive due diligence until September 6.

“Discussions between the parties remain incomplete and transaction terms are subject to ongoing negotiation,” it said.

“Securityholders should be aware that the board of TPG has not made any decision to accept any offer, and there is no certainty an agreed transaction will eventuate. If a transaction is able to be agreed, it would also remain subject to a range of conditions, including relevant regulatory approvals.

“TPG will keep the market updated in accordance with its continuous disclosure obligations.”  Vocus, which is owned by Macquarie Infrastructure and Aware Super, confirmed the talks.

“Vocus Group notes today’s ASX announcement by TPG Telecom Limited regarding a potential acquisition of assets from the company,” a Vocus spokesman told The Australian.

“Vocus continually assesses potential strategic opportunities that may enhance its offering to customers and support its long-term growth ambitions. Discussions with TPG are confidential, subject to conditions and regulatory approvals. Accordingly, there is no certainty a transaction will be agreed.”

TPG last year sold its mobile towers and rooftop infrastructure to Canadian pension fund OMERS in a deal worth $950m, a move CEO Inaki Berroeta said would help the telco repay its considerable bank debts, which sat at $3.6bn in December.

TPG was the last of Australia’s ‘‘big three’’ telcos to offload its towers arm. Optus sold 70 per cent of its towers business in October 2021 and Telstra that same year netted $2.8bn for the sale of 49 per cent of its telecommunications tower portfolio to Morrison & Co and the Future Fund.

TPG last month was forced to abandon a $1.8bn landmark network sharing deal with Telstra after the Australian Competition Tribunal knocked back an appeal.

Vocus is led by chief executive Ellie Sweeney, who in February flagged plans to add to the company’s significant fibre holdings.

Founded by entrepreneur James Spenceley in 2008, Vocus operates Australia’s second-largest intercapital fibre network. It became the nation’s fourth-largest telco following a merger with M2 Group in 2016. Aside from its significant fibre footprint, Vocus operates a number of consumer brands including Dodo, iPrimus and Commander.

“We’re going to double down on investing in its growth, building out its digital platform, and ­really putting us into a position where we can separate the business and then evaluate in 2024 and beyond on whether it makes sense to sell that business,” she said earlier this year.

She said her key priorities would include the company’s major fibre projects including Project Horizon, a 2000km fibre connection from Perth to Port Hedland, and Project Highclere, a 1000km submarine cable connecting Vocus’s Australia-Singapore Cable to the North West Cable System. “Those things for us really create a special opportunity for us,” she said.

Shares in TPG, which reports its interim financial results on August 24, last traded at $5.60.