TPG, Telstra sign ‘landmark’ sharing agreement

The decade-long partnership will deliver better coverage for thousands of Australians, with the rivals to use each others’ cellular towers across rural Australia.

Telstra has signed a landmark network sharing agreement with TPG. Picture: NCA NewsWire / David Mariuz

Australia’s competition and consumer watchdog says it will closely scrutinise a deal between rivals Telstra and TPG, who have signed a ten-year network sharing agreement that will increase their 4G and 5G spectrum across the country, and make TPG Australia’s second largest telco by network coverage.

The deal, announced Monday, will see Telstra will gain access to TPG’s 4G and 5G spectrum and around 169 extra mobile sites, while TPG will gain access to around 3,700 of Telstra’s cellular towers, boosting its 4G coverage to 98.8 per cent of the population from 96 per cent. Optus, previously in second place, covers 97.3 per cent of the population.

TPG Telecom – which also operates mobile brands including Vodafone, TPG, iiNet, Lebara and felix – will decommission the 725 mobile sites it currently operates within the relevant areas.

The landmark deal is extendable for a further decade, and will make TPG the second largest mobile network in Australia. The deal will benefit around 4 million Australians living rurally, and millions more in the cities who live on the ‘urban fringe’.

Shares in Telstra climbed 1.3 per cent to $3.96, while shares in TPG Telecom were up 2.9 per cent to $5.96.

Telstra chief executive Andy Penn said the agreement would lead to less congestion for its customers, particularly with more people moving to rural areas amid the pandemic.

Telstra CEO Andy Penn at the company’s HQ in Melbourne. Picture: Aaron Francis

“This additional spectrum will mean that all Telstra customers will continue to experience Australia’s best and fastest network across the country, in combined 4G and 5G speeds. In particular, the spectrum agreement will ensure that regional and rural customers will now. experience faster speeds in more locations on their mobiles,“ he said.

He added that the deal would bolster Telstra’s wholesale mobile revenues and would realise more value from the telco’s infrastructure for shareholders.

“The deal provides TPG Telecom with the opportunity to access some of our network assets within the defined zone. The access is similar to the way Telstra currently provides wholesale services to its MVNOs and Belong in this zone,” he said.

“Similar to monetising our passive infrastructure, it allows Telstra to have an innovative way of monetising some of our active mobile infrastructure, in areas where the population coverage is much smaller and more challenging in terms of returns and further investment and where there are already a number of competitors.

“Additional scale from this agreement therefore supports return on invested capital in these areas and makes ongoing investment in the network and innovation more sustainable.”

TPG Telecom CEO Iñaki Berroeta said he was ‘super excited’ by the deal.

Vodafone Australia chief executive officer Inaki Berroeta. Picture: iStock

“It represents a material uplift in the capability of our network and will provide significant value for TPG Telecom shareholders over the medium and long term,” he said.

“We will be open for business in regional and rural Australia like never before, offering a 4G network that provides 98.8 per cent population coverage and rapidly growing 5G coverage across the nation.

“To increase our geographical coverage by so much almost overnight is an ambition that I have had for a long time.”

The deal is expected to be live by the end of the year, with additional coverage to be automatic for all customers and to appear to them as provided by their current provider.

ACCC Chair Rod Sims, who led an unsuccessful challenge into TPG and Vodafone’s $15bn dollar merger in 2019, said he would be closely analysing the arrangement and its potential effects on competition.

“This is something we will have to look at very carefully,” he said.

The ACCC flagged last year that all three of the nation’s biggest telcos – Telstra, Optus and TPG – had raised their post-paid and pre-paid mobile plans since the TPG-Vodafone merger went ahead. The ACCC had argued the merger would damage local competition.

“The ACCC opposed the merger of TPG and Vodafone because we were concerned it would lead to higher mobile prices, and result in three similar providers with little incentive to compete strongly,” Mr Sims said at the time.