Optus ‘delighted’ as Telstra/TPG network sharing deal rejected

Telstra and TPG’s network-sharing partnership is dead in the water, after Australia’s competition tribunal sided with regulators to shut down the proposed deal.

The Australian Competition Tribunal has upheld a decision by the Australian Competition and Consumer Commission (ACCC) to reject Telstra and TPG’s plans, agreeing that the move would have ultimately hurt the Aussie mobile market. The ACCC had argued that approving the arrangement would only increase Telstra’s dominance in the sector, which in turn would lead to less competition and potentially higher mobile pricing.

Originally proposed in February 2022, the deal was first shot down by the ACCC in December, resulting in TPG and Telstra lodging a review with the Tribunal. However, the Tribunal agreed with the ACCC that the network-sharing arrangement was unlikely to offer real benefits to mobile users.

Unsurprisingly, Telstra and TPG’s biggest competitor is celebrating the Tribunal’s decision. Optus CEO, Kelly Bayer Rosmarin, said the telco is “delighted” to see the proposal blocked.

“This reinforces the importance of infrastructure-based competition and investment in our communications sector that will have lasting benefits for regional Australia,” Ms Bayer Rosmarin said.

“This is a good outcome for our regional communities as it will mean they will continue to benefit from competition, as Optus reaffirms its commitment to providing Australia’s regional communities with a strong network and great service.”

Pro-competition telco alliance Commpete backed the initial decision by the ACCC, and has also welcomed the Tribunal’s determination as a “decisive move” for the mobile market.

“This deal would have handed a dominant provider control over mobile pricing, service availability and service standards in the middle of a cost-of-living crisis,” Commpete Chair Michelle Lim said.

Telstra and TPG’s network-sharing proposal: was it really bad for Australians?

If approved, Telstra and TPG’s billion-dollar partnership would have allowed both telcos to share mobile assets and spectrum over a ten-year period. The deal would give TPG access to an additional 3,700 mobile sites across regional Australia, and grow TPG/Vodafone network coverage from 96% of the population to around 98.8%.

In return, Telstra would have received access to TPG’s 4G and 5G spectrum holdings. The telco would also be permitted to add its own infrastructure to up to 169 TPG mobile sites, allowing for increased speeds and reduced congestion for regional Telstra users.

Telstra and TPG argued that the partnership would improve their respective networks outside of major cities and more populated areas, and give regional customers better speeds and coverage. Presumably, the benefits would also extend to smaller telcos using the TPG/Vodafone or Telstra networks, including TPG Telecom brands iiNet, Internode, Lebara and Felix, and Telstra’s subsidiary Belong.

The deal would also strengthen the TPG brand, and allow Vodafone to compete more effectively against both Telstra and Optus in areas where the current network is lacking, such as rural Australia. In theory, this could mean a greater choice of plans and providers for regional customers; on the other hand, an expanded Telstra presence may actually stifle competition and push out smaller telcos.

The biggest selling point of the proposed agreement – better network coverage and performance in regional areas – may also have been a short-term gain. The ACCC and Optus both expressed concerns that allowing Telstra and TPG to join forces and share infrastructure would allow each telco to skimp on individual network investment over the ten-year arrangement, potentially leaving customers worse off in the future.

Increasing Telstra’s dominance in country Australia could also give Optus less incentive to improve its own regional infrastructure. Any of the three big telcos pulling back on network expansion, especially in the 5G space, could result in less competition and potentially higher prices for customers.

Household bills are already a concern for Aussie families with mobile pricing on the rise. Telstra has confirmed that its mobile plan prices will go up by as much as $6 per month from July 4, and other providers could follow suit. So, it’s understandable that the ACCC has taken a firm stance on any industry moves with the potential to cause further pricing mayhem, even if the effects won’t be felt for some time.

Could the network deal still go ahead?

Telstra and TPG confirmed that they will consider the Tribunal’s determination before deciding whether to take further action, but the telcos do have the option of appealing to the Federal Court for a judicial review. TPG Telecom Chief Executive Iñaki Berroeta said that TPG remained committed to delivering better services nation-wide.

“We are not giving up on regional Australia and will consider our options, as well as advocating for policy reform that will deliver greater competition and choice in the regions that need it most,” Mr Berroeta said.

Telstra boss Vicki Brady shared her disappointment with the decision, particularly as many community stakeholders had expressed support for the agreement.

“While Telstra will continue to have Australia’s largest and fastest mobile network, what today’s decision means for  the industry – at least for now – is less choice and valuable spectrum in regional Australia going unused,” Ms Brady said. 

“We’ll continue to advocate for getting the best possible outcomes for regional Australia and continue to look for commercially negotiated sharing arrangements to deliver better experiences for customers.”

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