Telstra-TPG tell ACCC their deal will increase competition: not true says Optus

Telstra and TPG say their proposed regional network sharing partnership will increase choice for customers in the regions and in capital cities but Optus strongly disagrees.

Telstra says its regional agreement with TPG will increase, not reduce, competition. Picture: Getty Images

Telstra and TPG, in a joint submission to the competition watchdog, say their proposed regional network sharing partnership will increase choice for customers – both in the regions and in capital cities.

The Australian Consumer and Competition Commission will as early as Tuesday make the submission public. The regulator is scrutinising the proposal to allow Telstra to merge its tower capability with TPG, with the smaller company to shut 725 mobile sites and migrate customers to its larger rival’s network. In return, it will lease a large chunk of its valuable spectrum to Telstra.

It’s a play that may see TPG leapfrog Optus to have the second-best mobile service offering in regional areas. Optus sees the deal as anti-competitive.

It is a deal that could trigger an eventual reshuffling of the players, with Telstra remaining the largest operator – and arguably getting stronger – with Optus potentially losing second spot to TPG, which is currently the third largest.

Optus has come out swinging today against the ACCC joint declaration, with chief executive Kelly Bayer Rosmarin saying the deal will leave regional Australia worse off.

“This arrangement is not in the best interest of Australian communities,” Ms Bayer Rosmarin said. “It massively advantages the incumbent provider and risks creating a regional monopoly reminiscent of the old Telecom days and entrenching the city-country divide.”

As part of the deal, TPG will share usage of 3700 of Telstra’s 11,000 towers and Telstra will gain access to TPG’s low band spectrum, which is valuable because it can be used for 3G to 5G, travels the longest distance, and can easily penetrate buildings. Some mid-band spectrum will also be included in the deal.

TPG will pay between $1.6bn to $1.8bn for the deal over 10 years.

“Under the proposed agreement, Telstra will be paid to face less competition and will gain unprecedented control over our scarce national spectrum assets,” Ms Bayer Rosmarin said. “Arguments from Telstra and TPG that slapping a new logo on top of the Telstra network creates competition won’t fool anyone.”

In the ACCC joint submission, Telstra and TPG argue the deal will give more choice to regional customers that currently only have the choice between Telstra or Optus. They will now also have TPG.

The first and third biggest players also say the deal will create more competition in urban areas because more people will consider TPG when it has a better regional offering, in case of trips to the country.

In the joint submission, Telstra and TPG argue that by pooling spectrum, it will create better utilisation of assets, or put simply better download speeds on mobile phones in areas where they will compete.

Telstra will also be able to use TPG’s spectrum in outer regional Australia where it is the only operator, which it argues to the ACCC will lead to better mobile phone performance there too.

As part of the ACCC submission, Telstra also raised the idea of taking over about 169 of the 725 that TPG plans to shut down, which are currently owned by third-parties.

This part of the submission may be designed to show that consumers will not be left with less competition as a result of the proposed merger of regional assets.

The ACCC submission is designed to show that this deal will lead to increased choice and therefore increased competition.

However Optus has called for the ACCC to reject the merger of Telstra and TPG’s regional and rural mobile networks. Optus pointed to Telstra’s unassailable dominance in regional areas, and the fact that spectrum is supposed to be divvied up by the Australian Communications and Media Authority based on competitive requirements, rather than on commercial deals.

“For over thirty years, Optus has been investing in an alternative national mobile network and keeping the large incumbent, Telstra, honest,” Ms Bayer Rosmarin said.

The ACCC said it expects to release the joint submission shortly.