Network-sharing deal with Optus showing green shoots for TPG

TPG is confident it will be able to recuperate the costs of its network-sharing deal with Optus with the addition of between 100,000 and 200,000 new customers.

TPG chief executive Iñaki Berroeta. Picture: Adam Yip

TPG Telecom is confident it will be able to recuperate the costs of its network sharing deal with Optus with the addition of 100,000-200,000 new customers.

But Australia’s third-largest telco has far greater ambitions than that and believes that recuperation may come sooner than later after the company flicked the switch on its landmark $1.6bn multi-operator core network (MOCN) with Optus last month, chief executive Inaki Berroeta told The Australian on Friday.

The 11-year deal, which doubled the TPG network overnight, has driven new Vodafone connections to a six-year high in February while the company saw a 50 per cent increase in customers switching to its network.

Data usage has surged 35 per cent overall, but doubled in Victoria, and voice calls had also “significantly” increased.

The telco’s customer growth in February was helping to offset the 49,000 post-paid users it lost in the second half of the 2024 financial year. Over the same period it grew its prepaid users by 79,000.

Over the 12 months to December 31, the telco lifted service revenue to $4.7bn after mobile revenue rose 5.4 per cent on the back rising average revenue per user (ARPU).

TPG post-paid ARPU lifted to $49.30, from $47.40, while its prepaid ARPU increased to $20.70, from $19.80.

The telco was also continuing to simplify its offering and cut back legacy plans across its stable.

“We have reduced the combined number of front and back-book consumer plans in market by 69 per cent from more than 3700 to 1145, and are on track to reduce plans to a target end state of approximately 100,” Mr Berroeta said.

On Friday, TPG reported a net loss of $107m for the full-year, largely down to the costs associated with the deal. Excluding the costs, the company’s profits would have grown 4.8 per cent to $87m.

The telco’s landmark $1.6bn Optus-TPG network sharing deal went live on January 30, with Mr Berroeta vowing that the company would end Australia’s “bush tax” for people in regional areas.

“This network sharing agreement and the expansion of our network in such a proportion is probably the single biggest upgrade that a mobile proposition has received in this market,” Mr Berroeta said. “The time to grow for us is now. We have a very tangible incremental value to bring to our customers … we were waiting for this moment.”

The telco will save significant costs associated with the maintenance of network towers under the new deal. Mr Berroeta said: “The business case basically says that between 100,000 and 200,000 new customers in the 11 years of the contract would make us break even.

“Obviously, our ambition is much greater than that so what that tells you is that the business case is pretty straightforward because we don’t really need to do much to get a payback on that.”

TPG had begun investing heavily into marketing and awareness campaigns across regional Australia, which the telco now sees as a key battleground.

The telco has lifted its earnings before interest, taxes, depreciation and amortisation (EBITDA) to $1.71bn including the “disclosed impairment” from the Optus regional networking sharing deal.

The company expects EBITDA to range from $1.95bn-$2.02bn in the 2025 financial year.

The network sharing deal, which Mr Berroeta described as “a set change”, had grown TPG’s population coverage to 98.4 per cent of Australia, 89.7 per cent of which was now covered by 5G.

“Over the coming years, TPG Telecom is positioned to capture greater revenue share following the significant increase in the reach of our mobile network, while making things even simpler for our customers and delivering an increasingly efficient cost and capital base,” Mr Berroeta said.

TPG shares closed 2.43 per cent higher on Friday at $4.63.

TPG will pay a final dividend of 9c, bringing its full-year dividend to 18c.

Originally published as Network-sharing deal with Optus showing green shoots for TPG