TPG sells fibre and fixed assets to Vocus for $5.25bn

After halting talks late last year, TPG and Macquarie-backed Vocus have finally cemented a deal, saying it will ‘create a challenger of scale in the enterprise connectivity sector’.

TPG CEO Iñaki Berroeta says the Vocus deal is a ‘great outcome for large customers for fixed telecommunications services in Australia’. Photographer: Adam Yip

TPG Telecom, will sell its enterprise, government and wholesale fixed and fibre network assets – including Vision Network – to Macquarie-backed Vocus for $5.25bn.

TPG, Australia’s third biggest telco, announced the sale, which involves a binding share purchase agreement, on Monday.

Vocus said the deal will set it up as a “key digital infrastructure operator in Australia”, operating a network of more than 50,000km of owned and leased fibre assets and almost 15,000 of international submarine cables.

It comes after TPG halted a $6.3bn sale and leaseback of its non-fibre mobile assets with Vocus last November, citing scale and complexity. But the telco said it remained open to a deal at the time.

Under the terms of the sale agreement, Vocus and TPG will enter a long-term strategic partnership. Vocus will provide TPG with ongoing access to fibre infrastructure, which it said would deliver “enduring network planning and access certainty”.

TPG chief executive Iñaki Berroeta said the deal represented a “simpler operating model” to the 2023 talks and was a great outcome for large customers for fixed telecommunications services in Australia.

The sale will create a challenger of scale in the enterprise connectivity sector with strength in international, intercapital, regional and metropolitan connectivity.

“We are pleased to announce this transaction and the successful conclusion of the strategic review of our fibre network infrastructure assets,” Mr Berroeta said.

“The transaction reflects a smaller asset perimeter compared with the original discussions with Vocus in 2023, resulting in a simpler operating model than was envisaged in the original discussions.

“The deal unlocks the value of our fixed infrastructure assets while strengthening our financial position and creating a more focused and streamlined business with significant

optionality for the optimisation of our capital structure.”

TPG anticipates the Transaction will deliver net cash proceeds of $4.65-$4.75bn, which will support future capital management and business investment initiatives.

Details of such future initiatives have not yet been determined and remain subject to development. TPG anticipates providing more detail to the market around the time of Transaction completion.

“We look forward to a long-term partnership with Vocus that will support TPG Telecom’s

ambition to be Australia’s best telco,” Mr Berroeta said.

“We are committed to working as efficiently as possible with Vocus and regulators to bring the Transaction to completion and providing the smoothest possible transition for our enterprise, government and wholesale fixed customers and the approximately 560 TPG people who will transition to Vocus.

The Transaction includes TPG entering a transmission and wholesale fibre access (TAWFA) Agreement with Vocus under which Vocus will provide network services to TPG for a fee of $130m per annum.

The TAWFA has an initial 15-year term with two 10-year extensions at TPG’s election and is designed to ensure TPG maintains “owner economics” of the fibre network, meaning pricing is non-volumetric and increased only in relation to indexed and capped inflation and network expansion requiring the deployment of new physical infrastructure.

TPG expects about half of the TAWFA payment will be accounted as a lease expense and the remainder recognised within EBITDA.

The parties are targeting completion of the Transaction in the second half of 2025 subject to satisfaction of conditions precedent, including regulatory approvals.

Originally published as TPG sells fibre and fixed assets to Vocus for $5.25bn