TPG is poised to become the fourth mobile network in Australia, joining Telstra, Optus, and Vodafone. This is after successfully purchasing 2 x 10MHz of mobile broadband spectrum in the 700MHz band. With that settled, TPG’s focus is now on acquisitions and the strategy to use to lure the millions of Australians. An analysis by Telsyte predicts that close to 40% of Australians are likely to move to TPG’s network. However, this will happen only if the telco offers benefits such as unlimited data, bundling discounts, and free trial periods.
Australian consumers increasingly becoming price sensitive. This poses a challenge to TPG which must devise a strategy that brings new mobile services to market profitably and not just attract customers who are after bargains.
Connecting one million services in operation (SIOs) in the first two years may be an uphill task for TPG unless it explores opportunities presented by innovative technologies. Some of the technologies it can capitalize on include eSIM connectivity, machine-to-machine (M2M) connections, and wearables.
Fierce Competition from MVNOs
In the first half of 2017, mobile virtual network operators (MVNOs) have recorded tremendous growth, attracting a total of 200,000 new SIOs. This performance outshined what Telstra, Optus, and Vodafone recorded in their individual capacities. The top MVNOs in the 6-month period under review were Amaysim, Kogan Mobile, and ALDImobile.
The most crucial factor Aussies consider when choosing a telco is price. According to Telsyte, network performance comes second. It is this prioritisation that pushed MVNOs up the performance ladder because their plans are much fairer compared to the main telcos. Another study by Kantar, released in November 2017, shows Telstra leading the Australian mobile market with a total share of 37.9%. Optus and Vodafone come second and third with 24.2% and 15.7% respectively.
The remaining market share (22%) is accounted for by MVNOs which include Virgin Mobile, Amaysim/Vaya, TPG, and ALDImobile. Much like Telsyte, Kantar found that subscribers are prioritising low-priced, high data allowances when choosing telcos. Vodafone has taken advantage of this by offering AU$40 to AU$50 plans that offer up to 20GB of data.
TPG Mobile Network Rollout Progress
In September 2017, TPG gave an update on the status of its AU$1.9 billion mobile network roll out. It indicated that they have made strong progress and by mid-2018, they expect to have completed the network across Sydney, Melbourne, and Canberra.
To push the network forward, TPG has had to sign contracts with multiple strategic technology partners on small cells, macro cells, and mobile sites. This is particularly in densely populated areas where it wants to gain access to large volumes of sites to enable it to cover the major metropolitan areas. This leaves it to focus on 4G and 5G readiness.
During the presentation of its FY17 financial results, TPG stated that it will use the higher density small cell sites for the 4G LTE rollout as well as to provide key infrastructural assets to support the 5G evolution.
Currently, TPG wholesales 4G network from Vodafone as it gradually builds its own. As of July 2017, the telco had a total of 445,000 mobile customers comprising 290,000 its network and 155,000 on iiNet.
As part of its strategy, TPG plans to use its existing 2.5GHz and 1800MHz bands together with what it purchased (2 x 10MHz mobile band spectrum in the 700MHz band) to provide stronger and more reliable connections. To make the rollout successful, the company targeted to raise AU$400 million, AU$320 of which was already raised by CEO David Teoh and Washington H Soul, two major TPG shareholders. The remaining amount is to be raised through issuance of new fully paid ordinary shares.
TPG is not just making a foray into the Australian telco market, but the Singaporean market as well. Here, it is aiming to build a fourth mobile network with its first milestone of attaining outdoor coverage to be completed by end of 2018.
If the telco will consider the voices of the Australian people and package its plans in a way that appeals to them, it is likely to experience a soft market entry. Leveraging on its strong fixed line network, it can bundle with the mobile network for quality hybrid plans.