Australian Mobile Networks Progress With Capital-Light Sharing Agreement — Update

By Stuart Condie

SYDNEY--TPG Telecom and Optus secured permission from Australia's competition watchdog to share mobile network assets, giving the country's second- and third-largest telecommunications providers a chance to reach new users without investing significant capital.

The deal is designed to help both companies to improve service in regional areas, which can be several hundred miles from the eight cities that house more than 70% of the country's 26 million people. A large majority of the population lives close to the coast, making it expensive to build infrastructure to service those inland.

TPG will piggyback on infrastructure belonging to Singapore Telecommunications-owned Optus, while Optus will get access to TPG's valuable mobile spectrum. Both should be able to reach more customers without additional capital expenditure that would run to many billions of dollars.

"By sharing costs and network assets, we can bring coverage benefits to customers at a fraction of the cost of duplicating infrastructure," TPG Chief Executive Iñaki Berroeta said.

The watchdog previously blocked TPG's earlier plan to share regional assets with Telstra, the country's largest communications provider. It said at the time that the proposal would have probably lessened competition and lowered service standards.

The Australian Competition and Consumer Commission on Thursday said it had no such concerns about a tie-up between No. 2 player Optus and No. 3 TPG, which sells services under brands including Vodafone Australia.

"The agreements will allow TPG to provide better coverage in regional areas, which will likely enhance its ability to compete during the term of the agreements, improving choice for regional consumers," ACCC Commissioner Philip Williams said.

The deal comes at a time when global telecommunications companies are looking for ways to cut costs after investing heavily in new infrastructure to meet soaring demand from consumers and businesses.

Telstra, Optus and TPG have recently cut hundreds of jobs, while efforts to monetize existing assets includes Telstra's 2021 sale of 49% of its towers business to a consortium of superannuation investors for 2.8 billion Australian dollars (US$1.88 billion).

In April, TPG said it would pay Optus about A$1.17 billion for access to 2,444 mobile-network sites in regional Australia. It expects to pay service fees of about A$1.59 billion to Optus over 11 years, recouping about A$420 million for allowing Optus to access its mobile spectrum.

TPG's net outlay to more than double the size of its national mobile network will be about a third of the cost of building and maintaining its own regional network, TPG said at the time.

On Thursday, Optus said that the deal would significantly speed up the rollout of 5G mobile infrastructure to regional areas.

This is so important for customers given how essential mobile services are to our daily lives," said Michael Venter, Optus's interim CEO.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

September 04, 2024 23:12 ET (03:12 GMT)

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