TPG Telecom joins Telstra to boost regional coverage
Telstra and TPG Telecom (Vodafone) just inked a deal to share mobile networks for a decade. While both telcos have been openly at odds on the regulatory front in Australia for several years, this latest development marks a significant about-face.
Telstra has been the largest telco in Australia for a long time, boasting of the widest mobile coverage throughout Australia. Most importantly, the giant telco’s mobile coverage in rural areas is one of its most significant differentiator in the telco market, making Telstra the go-to telco for regional/rural Australians.
TPG Telecom (Vodafone), on the other hand, is a largely urban telco with most of its coverage in Australian cities and suburbs.
With Telstra holding a plethora of mobile network assets throughout the country, TPG Telecom will see a significant boost in coverage by sharing those assets. Telstra, of course, isn’t doing this for free – the telco expects significant revenue from the deal over the next 10 years, along with some coverage expansion as well.
While this news seems like a win-win for both Telstra and TPG Telecom, the outgoing Australian Competition and Consumer Commission (ACCC) boss has expressed concerns over the deal, stating that it could reduce competition and drive up mobile SIM plan prices.
In this article, we’ll tell you all about Telstra and TPG Telecom’s latest deal, and how it can impact the telco market.
Background: Telstra / TPG Telecom past network sharing disagreements
Regional and rural Australia just isn’t populated enough to make significant investments in mobile networks a profitable endeavor. Telcos like TPG Telecom realize this fact, searching for alternative ways to tap into the sparsely populated regions.
Telstra, in comparison, has a significant mobile network footprint in regional Australia. Because the telco’s started off as a government entity before eventually becoming publicly owned, Telstra has enjoyed vast expansions of their telco network infrastructure over several decades.
Tapping into Telstra’s regional mobile network coverage has been a coveted move for telcos like TPG which lack wide rural networks and are unwilling to invest the capital needed to build such an infrastructure. But Telstra has opposed the idea in the past.
For instance, back in 2017, Vodafone sought the government’s backing to force Telstra and Optus to share their regional mobile networks. The ACCC disagreed, and Vodafone took the matter to federal court on appeal. The appeals court dismissed the appeal, leaving telcos like Vodafone and TPG to fend for their own regional network expansion.
That public spat between the telcos makes their latest deal seem like a surprise. Today, both Telstra and TPG Telecom have hammered out a 10-year deal that grants TPG Telecom exactly what it sought 5 years ago – Telstra’s widespread regional mobile network – for a fee, of course.
Key details of the Telstra and TPG Telecom network sharing deal
Both Telstra and TPG Telecom have a lot to gain from the new mobile network sharing deal. Although the deal boosts coverage for both telcos, each will continue operating their individual core networks in the shared coverage areas.
Here’s a brief look at the key details:
- What does TPG Telecom get?
TPG Telecom will get access to 3,700 Telstra mobile 4G and 5G networks across specific regional and urban fringe areas. This could potentially boost TPG Telecom’s mobile coverage from 96 per cent to 98.8 per cent, catapulting the telco’s coverage ahead of Optus. - What does Telstra get?
Telstra forecasts AU$1.6 billion to AU$1.8 billion in revenue over 10 years resulting from the deal. In addition, TPG Telecom will also grant Telstra access to some of its own 4G and 5G network to boost Telstra’s coverage and bandwidth even more, and allow Telstra install equipment on as many as 169 TPG mobile sites.
What the Telstra and TPG Telecom network sharing deal means for consumers
While many of the details have been hammered out and made public, the ACCC has to approve the network sharing deal later this year in order for it to become a reality. And right now, the ACCC boss has pointed out some possible negative impacts of such a deal, which might affect consumers significantly.
According to ACCC boss Rod Sims, the network sharing deal could reduce competition and increase the prices of mobile SIM plans in Australia. Mr. Sims pointed out that, “Vodafone, of course is paying money to Telstra, so it has to recover that. We really need to understand the impact on prices because at the moment, you’ve got a bit of a competitive dynamic. We’re concerned about whether that dynamic will disappear.”
Mr. Sim’s point is simple – if Telstra and TPG Telecom share their networks, TPG Telecom will then have the second widest coverage in Australia, a position that currently belongs to Optus. And if that gain becomes a reality simply because of a partnership between to long-time telco rivals (Telstra and TPG Telecom), then they would be inclined to help each other out by avoiding price wars, which will essentially reduce competition in the market. Vodafone could raise prices of SIM plans in order to recoup expenses paid to Telstra for their network, and the sudden coverage boost will be a selling point to do just that.
Recall that Mr. Sim’s ACCC was behind the decision to deny TPG merger with Vodafone Hutchinson Australia back in 2019. That battle dragged on for over a year, ending in 2020 when a federal judge approved the merger, resulting in the newly-formed TPG Telecom which now controls Vodafone in Australia.
With knowledge of Mr. Sim’s fierce opposition of the TPG/Vodafone merger, one might consider whether another fierce opposition of this latest TPG Telecom expansion move is to be expected.
Regardless of whether or not the network sharing deal will be approved, we agree that the ACCC has a point this time around – mobile plans might, indeed, become more expensive. We’ve become used to TPG Telecom as a major telco that is also budget-friendly because of their limited coverage. However, with a significant coverage boost from this networking sharing deal, TPG Telecom will not have any reason to remain budget-friendly.
Bottom line
For as long as Australians can remember, Telstra has always had better coverage than Vodafone, and life was as simple as that. This is what makes the Telstra / TPG Telecom network sharing deal into stunning news.
The fundamental problem of running a telco in Australia is population density. There is so much land out there and so few people that covering the whole island continent with mobile signals is an expensive business. Telstra’s previous government ownership meant that they started with a network which reached far more people and Vodafone could never justify the expensive needed to further a regional/rural rollout.
The merger between Vodafone and TPG has changed how all of this works. It’s given Vodafone the scale it needs to compete more directly with Big T. The repercussions are hard to estimate at this stage, given how huge the move is. We will report further developments as they unfold.