TPG joins NBN critics over NBN’s business services

TPG has joined the chorus against the high speed network, saying it’s wasting public money duplicating infrastructure.

TPG CEO David Teoh. Picture: Getty Images

TPG boss David Teoh has voiced concerns about NBN Co’s pursuit of business customers, joining the chief executives of Telstra and Vocus in labelling it a waste of taxpayer funds.

Speaking to shareholders on Wednesday, Mr Teoh said NBN Co’s push to roll out fibre to areas already well-served by telcos needed to be questioned.

“We do have concerns about NBN’s increasing involvement in the business market in areas where there is already substantial existing fibre, from numerous competitive carriers,” Mr Teoh said.

While TPG’s reputation was built on providing broadband services to consumers, its business offerings were gaining traction in the market, providing a hedge against the pressure on its margins because of the NBN, he said.

“Our corporate business has been continuing to grow quietly, especially in terms of product and service quality.”

“Most people know the TPG brands in the consumer space, but our reputation for service quality is becoming increasingly well regarded in the large corporate and enterprise market, and some successes that we have had since the year end reinforce our credentials in that space,” he said.

Toll on earnings

The rollout of the NBN has taken a toll on TPG’s full year 2019 earnings, with the telco’s underlying earnings declining by $4 million to $818 million during the period.

Financial year 2020 will see further pressure on TPG’s numbers.

Despite NBN Co launching new wholesale prices in November, the TPG argued on Wednesday that the changes don’t go far enough.

“Our NBN economics remain in worse condition…CVC bundle inclusions are not enough to match the rise in customer data demand,” TPG chief financial officer Stephen Banfield told shareholders.

With NBN Co’s push into the business market threatening to undercut TPG’s corporate business, the telco joined its peers in trying to get the federal government to intervene.

“We don’t understand why taxpayer funds would be used to overbuild existing infrastructure in these areas,” Mr Teoh said.

Telstra boss Andrew Penn and Vocus CEO Kevin Russell have both been openly critical of NBN Co’s intrusion, with Mr Russell particularly aggressive in his attacks on NBN Co’s current practices.

According to Mr Russell, NBN Co had deviated from its original remit and was not operating as a wholesale access provider.

“The government needs to issue NBN Co with a new ‘statement of expectations’ to provide it with clear policy objectives in enterprise,” he said in October.

“Because in the absence of long-term policy objectives, NBN’s behaviour is being driven primarily by the need to fill a financial hole,” he said.

NBN Co has consistently rejected the allegations, saying that its business ambitions were always flagged to the industry and fully justified.

According to NBN Co, it’s not offering non-commercial terms to businesses to undercut the likes of Telstra, Vocus and TPG.

The telco can sell business-grade services to corporates over the NBN, however their margins are lower compared to when they deliver them over their own fibre infrastructure.

It’s an erosion in earnings that TPG is especially keen to avoid given that its mobile ambitions remain uncertain.

“FY19 was a difficult year for our Group with two major regulatory decisions adversely impacting our ability to deliver on our long-term strategies,” Mr Teoh said.

The federal government’s decision to ban Huawei from the rollout of 5G networks has been cited by TPG as the main reason for its decision to stop its mobile rollout. Meanwhile, the Australian Competition and Consumer Commission (ACCC) has rejected the telco’s mooted merger with Vodafone Hutchison Australia (VHA).

Both telcos have appealed the ACCC’s decision, with proceedings heard in federal court in September and judgment expected to land by February 2020.

TPG’s general counsel Tony Moffat told shareholders that the telco had mounted a strenuous legal case in defence of the merger.

“We are very comfortable with the way our case was presented to the court, we had the finest competition lawyers working for us on the matter and we believe that we presented a very clear picture about our position when it comes to any future mobile strategy.”

“There was once a technical solution that would have worked for us but since the government’s ban on the use of Huawei for 5G there is no viable replacement technology solution suitable for TPG.”

“If the merger is not approved we will be looking at other options to monetise our spectrum and mobile assets,” he said.