Telstra chief executive Andy Penn says the best way to solve mobile coverage in regional areas is the government’s black spot program, not forcing the telco giant to share its network with competitors.
Speaking to The Australian Financial Review following the activation of its 100th mobile base station in the regional Victorian town of Culla, as part of the federal government’s Mobile Black Spot Program, Mr Penn praised the initiative as the solution to investing in uneconomical areas of regional Australia.
He said if the Australian Competition and Consumer Commission declared domestic mobile roaming, whereby it would force Telstra to provide access to its network to competitors for a fee, it would hurt investment in regional areas.
“I think the black spots program is a very good program,” Mr Penn said. “This is the model to solve coverage … roaming is not the model to solve coverage. If you implement roaming, that will, I think, undermine the black spots program.”
Mr Penn said it would take away incentive for Telstra to continue to expand its network, differentiating itself from its competitors.
The ACCC is considering domestic mobile roaming and industry sources said a decision could come later this month or early April.
The mobile black spots program is a co-funded arrangement with federal and state governments supplementing investment from Telstra, Vodafone and Optus.
Telstra has committed $228.7 million over rounds one and two, Vodafone $21.6 million over the two rounds and Optus $36.4 million in round two.
The government identifies sites for new towers in areas with poor or no mobile coverage and telco operators install them as part of the program.
The federal government committed $220 million and the rest of the near $600 million used or planned for investment is coming from various state governments.
Mr Penn committed Telstra to installing its 200th mobile base station by the end of 2017. Telstra has signed up to build a total of 577.
Telstra would prefer to carry on with the black spots program as it would face a challenge to its earnings and business model if it were forced to share its network. Goldman Sachs analysis suggests Telstra could lose $546 million from its 2017-18 earnings if the ACCC declares mobile roaming because the fees from competitors would not offset the damage to the telco’s position.
The possibility has put Telstra shareholders on edge, with many mum and dad shareholders venting their fears at Telstra’s annual general meeting last year.
Network coverage is a fundamental pillar of Telstra’s mobile offering and its ability to charge more to its customers. If domestic roaming were declared, theoretically every network could offer the same coverage, taking that advantage away, and could lead to pressure in pricing and even customer losses.
“The ACCC is going through its process and we respect and understand that,” Mr Penn said.
“What we’ve really been doing is make sure people understand that mobile roaming, if it were declared, would have a negative effect on investment in regional and rural Australia.”