The ACCC has predicted that if the proposed Telstra/TPG deal isn’t allowed, TPG could try teaming up with Telstra’s biggest competitor Optus. Although we can understand why TPG like the idea of having Optus as their plan B, might it not seem hypocritical of Optus to go along with it?
About the Telstra-TPG Deal.
Currently, TPG and Telstra are in talks to join forces to provide better quality internet for people in rural Australia. The deal will see both take down and share aspects of their infrastructure.
In the end, both will have more customers and be able to provide better service.
However, Optus disagrees. They say all the deal will do is make the marketplace less competitive, and prevent people from being able to shop around for better options. The ACCC’s job is to balance the arguments from both sides and decide whether or not to allow a potential merger between Telstra and TPG. By the way, you probably know TPG by the name “Vodafone.”
Potential responses from Optus.
In light of Optus’ worries, many have speculated how they might react should the ACCC approve what we’ll call “The T&T Deal.” One idea is that Optus will release that the competition has just ramped up and act accordingly. This means investing more in 5G infrastructure and sorting those investments out quickly. If T&T can create a faster and broader 5G network than Optus, it makes sense that the latter would pull their socks up.
However, the more pessimistic idea is that the merger could hit Optus. With T&T expected to be able to provide faster internet for more people, the amount of money Optus has to invest could go down. With a competitor as large as the proposed T&T and little finances to compete against them properly, we may see the end of Optus.
Could TPG team up with Optus instead of Telstra?
The ACCC has said that if the T&T deal falls through, TPG could turn to their former partner’s biggest competitor. Should we get a T&O deal, it could benefit both sides. Much like with the T&T deal, TPG would get better coverage as they could use the same infrastructure Optus have.
Optus could also benefit as they would get revenue from some of TPG’s MVNOs. It would be a win-win for both sides. Wouldn’t it?
Why TPG and Optus Probably won’t team up.
Despite the ACCC’s suggestion, I beg to differ. Even if Optus and Telstra wanted to team up, I highly doubt the ACCC would approve it. If a T&O deal is put in front of the ACCC, it would be because they would have denied the T&T deal. In this potential scenario, Optus would have convinced the ACCC that a T&T deal would be bad for competition and Australians. Telstra could easily use Optus’ own arguments against them.
Remember, the ACCC, not the tier 1 Telcos, have the final say on any merger-esqe deals that these companies wish to go into.
Plus, we imagine that it would be a PR disaster for Optus. If they convince the ACCC that a Telco merger would be bad for Australia, people could say, “Hang on a minute. I thought these deals were bad for Aussies. And now you’re going to do one yourself?! That makes no sense”.
Conclusion
Based on what the ACCC has said, Optus might TRY to merge with TPG. However, it’s unlikely that this deal will be allowed. Should Telstra and TPG not be allowed to team up due to the damage it would do to competition and consumer choices; I struggle to see why TPG would be allowed to make a similar deal with another Tier 1 Telco. Although maybe I’m wrong. Perhaps there is something in the deal’s small print that I am unaware of that could mean TPG can merge with Optus but not Telstra. Only time can tell.