TPG will build its own mobile network covering Australia in a move set to shake up the telecommunications landscape, after paying $1.26 billion for a slice of the 4G mobile spectrum.
The company, which currently buys access to the network for its mobile products from Vodafone, will spend $600 million over three years building the network.
TPG results beats expectations
Telecommunications company TPG reports a net profit of $224 million in the six months to the end of January. (Courtesy ABC News 24)
TPG entered a trading halt on Wednesday morning before announcing its plans for the network, which will be funded in part by a $400 million entitlement offer.
Chief executive David Teoh said TPG would leverage its successful fixed-line broadband business to bring new competition to the mobile market.
“We believe that our mobile strategy will be complementary to our ongoing fixed-line business, with the ability to bundle mobile and fixed services expected to have a beneficial effect on our already low fixed services customer churn,” Mr Teoh said.
The federal government reaped a total of $1.5 billion by selling off a chunk of 4G mobile spectrum left over from the 2013 Digital Dividend auction, it revealed on Wednesday.
TPG secured two times 10 MHz for $1.26 billion and Vodafone secured two times 5 MHz for $285.9 million, the Australian Communications and Media Authority said. The $1.5 billion sale price it well beyond the reserve price of $857 million.
A spokeswoman for Communications Minister Mitch Fifield said the cash would go into the government’s consolidated revenue.
The 700 MHz spectrum is left over from the 2013 Digital Dividend auction, which generated $2 billion for the government with a reserve price of $1.25 per MHz per population. (The spectrum became available after television networks switched from analog to more efficient digital signals, hence ‘digital dividend’).
Telstra and Optus both purchased high and low frequency spectrum – Telstra bought the most and paid $1.3 billion, while Optus paid $650 million. TPG purchased its first spectrum in Australia, securing 20 MHz at 2.5 gigahertz (GHz) for $13.5 million.
Telstra and Optus were the only telcos to buy 700 Mhz spectrum, which is much better for sending signals through congested city areas. The lower frequency travels through walls easier, in much the same way the bass notes in music do.
Vodafone withdrew from the 2013 auction and did not purchase any spectrum, leaving the government with 30 MHz of spectrum at the 700 MHz frequency. But then in early 2016 Vodafone then made an unsolicited bid of $600 million for the spectrum, which angered its competitors.
The government launched a public consultation and decided to auction the spectrum off with a similar reserve as the 2013 auction
In October 2016, the ACMA released a consultation paper setting out how it proposes to configure the spectrum for auction and how the auction is proposed to operate. The ACMA received nine submissions to this consultation.
More to come