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Australia's TPG Telecom shakes up 4G market with new $1.4 billion network
April 12, 2017 / 12:15 AM / 6 months ago

Australia's TPG Telecom shakes up 4G market with new $1.4 billion network

SYDNEY (Reuters) - TPG Telecom (TPM.AX) up-ended Australia’s 4G mobile market on Wednesday by buying spectrum and announcing plans to build a $1.4 billion (1.12 billion pounds) network to rival Singapore Telecommunications (STEL.SI), Telstra Corp (TLS.AX) and Vodafone Group (VOD.L).

The logo of Australia's TPG Telecom Ltd can be seen outside their head office in Sydney, Australia, April 12, 2017. REUTERS/David Gray

The low-cost internet provider which is 34 percent-owned by Malaysia-born David Teoh was an outsider winner at a government auction of 700 MHz spectrum, freed up since the country’s television stations went digital.

It was the only bidder without an existing 4G network, and won two 10-MHz spectrum bands with a A$1.26 billion (£755.60 million) bid. It said it would spend another A$600 million building a 4G network to reach 80 percent of the population.

The move promises to shake up Australia’s 4G mobile market, currently dominated by network owners Telstra, which has 39 percent of contracts, followed by SingTel’s Optus and Vodafone. Mobile has overtaken Telstra’s declining fixed-line business to become its biggest earner.

Telstra shares were down 7.5 percent by mid-session, in a flat overall market, their biggest intraday fall since 2010 as investors worried that a new cut-price rival would hurt profitability.

“Margins in the mobile market are going to be squeezed,” said Paul Budde, of telecoms consultancy Paul Budde Communication.

A woman looks at her phone as she walks past an advertisement for Australia's TPG Telecom Ltd in central Sydney, Australia, April 12, 2017. REUTERS/Steven Saphore

“That has a major effect on Telstra because they still are the one with the best margins in the wireless market.”

SingTel shares fell as much as 2.6 percent, while Vodafone’s London-listed shares were untraded because the market was closed.

Slideshow (4 Images)

In the auction, Vodafone, which co-owns its Australian business with Hong Kong’s CK Hutchison Holdings (0001.HK), picked up two 5-MHz bands for A$286 million, enabling it to add to its network.

The Australian Communications and Media Authority, which ran the auction, said the total proceeds of more than A$1.5 billion beat the A$857 million reserve.

Telstra was excluded on the grounds that it already had too much spectrum.

A Telstra spokesman said the auction showed Australia had a “strong and competitive mobile market under the current regulatory settings”.

Reporting by Byron Kaye; Editing by Stephen Coates

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