TPG tells Federal Court it’s too late for 5G rollout

TPG has told the Federal Court its original 5G network plan would no longer work because the market has moved on.

TPG says Huawei was willing to customise its equipment to suit its network rollout plans. Picture: AFP

TPG Telecom and Vodafone Hutchison Australia have hit back at the competition regulator’s assertions that they can take on Telstra and Optus as independent mobile operators in the opening salvo of their court bid to revive their $15bn merger.

The first day of the three-week trial at the Federal Court saw the three parties lay out their positions, with TPG making it clear that it is not in a position to restart the rollout of its mobile network, which was put on ice in January.

Meanwhile, Vodafone Australia’s counsel Peter Brereton QC took the ACCC to task over its rationale for blocking the deal.

The ACCC maintains that the merger will reduce competition in the retail mobile market, with TPG’s previously stated plan of rolling out a mobile network the best way to increase competition in the market.

According to the regulator, the merger is being sought as a quick fix by both telcos and any potential competition benefits of the merger are likely to be short-lived.

However, Mr Brereton contends that ACCC’s position is fundamentally flawed.

“It’s wrong as a matter of commerce, technology, economics and law,” he said.

He added that there was no real chance that TPG would become a fourth mobile operator and even if it did build a network, it would not deliver the type of competition the ACCC was looking for. “As a network it will be hopeless and will be capacity-constrained very quickly,” he said.

In TPG’s opening statement to the court on Tuesday, the telco’s counsel Ruth Higgins SC backed up the sentiment, saying the ACCC was forcing TPG to commit to a network that it did not want to build, especially now that it could not use Huawei’s 5G equipment.

“The ACCC requires TPG to bring a complex nationwide infrastructure into operation,” she said.

“The ACCC’s case creates an impression that all that is required is for TPG to finish what it has started, but the partial network can’t be upgraded to 5G.

“It will have to roll out a brand new network … the market and TPG have moved on.”

She added that an unsuccessful appeal would leave TPG a bit player in the budget end of the market, which is awash with mobile resellers.

The downbeat assessment is a far cry from when TPG announced its mobile plans in 2017, initially promising a network comparable to those of Telstra, Optus and Vodafone Australia. It also suggested that it would compete fiercely on price, with an introductory $9.99 offer for an “unlimited” mobile plan.

TPG’s statements on Tuesday painted a less rosy picture of the telco curtailing its mobile ambitions in the face of community opposition, its limited spectrum holdings and the eventual banning in Australia of 5G kit from its equipment supplier, Huawei.

TPG had to downgrade its original plans for a macro network like that of Telstra, Optus and Vodafone Australia to a small cell mobile network. The change was necessary for TPG to maximise use of its limited 4G spectrum holdings and it was also the reason why it picked Huawei as its equipment vendor.

Huawei could supply the equipment more cheaply, and its equipment provided an easy upgrade path from 4G to 5G. It also allowed TPG to better manage small cell network interference — a consequence of re-using spectrum — and it was also willing to customise the equipment for TPG.

According to TPG, the federal government’s decision to ban Huawei’s 5G equipment was the final nail in the coffin, with Huawei’s rivals — Ericsson and Nokia — unable to provide the kit that it required.

“None of those vendors had an existing solution or had one on a road map,” Ms Higgins said. “The novelty of TPG’s approach had created bespoke requirements.”

Whether TPG can still be a mobile player and whether Vodafone Australia can remain a viable third operator are crucial to the outcome of the appeal.

The ACCC is challenging the claims made by the telcos that they need to merge to compete more strongly. Despite the poor outlook claimed by TPG and Vodafone, the regulator contends they are being opportunistically pessimistic.

ACCC’s legal counsel Michael Hodge said there was no reason why TPG could not run a 4G network of sufficient scale and performance.

“It’s entirely commercially realistic that TPG can roll out a mobile network,” he told the court.

He added that TPG was not the only telco dealing with the challenges of rolling out mobile networks.

“TPG will be engaged in exactly the same challenges as everybody else … these are just practical issues.”

Vodafone Australia has had to defend its claim that it cannot compete effectively against Telstra or Optus in a 5G environment.

The ACCC put Vodafone Australia boss Inaki Berroeta under concerted pressure over earlier guidance provided by the telco on the relative health of its business.

According to the ACCC, Vodafone Australia had previously said that it had the resources in hand to compete in the cities, especially Sydney and Melbourne, and had since changed its tune.

However, Mr Berroeta hit back at expert testimony put forward by the ACCC’s legal team that shows that Vodafone has more spectrum than Telstra on a per customer basis in metro areas.

“We do not have the spectrum.

“The amount of spectrum Telstra and Optus in terms of megahertz (MHz) at a per customer level is more than us,” he told the court.  Mr Berroeta responded by saying that the guidance highlighted by the ACCC was aspirational.

“We were a bit optimistic at the time. It was aspirational statements,” he said.

“There have been a number of issues that have come up, especially with regards to congestion (on the network).”