Analyst: TPG to exercise more cost control

Analyst: TPG to exercise more cost control

The acquisition of Pipe Networks could result in more 'unlimited' downloads and value offers

TPG’s acquisition of Pipe Networks will give the company better control over the cost of buying international network capacity, according to an analyst.

Last week, TPG laid down an offer to purchase Pipe for $6.30 per share. The deal was approved by shareholders on March 12 for $373 million. It will go before the Queensland Supreme Court for approval on Wednesday.

Ovum research director, David Kennedy, said the acquisition might not make much of an impact on product offerings, but TPG could introduce new packages that include ‘unlimited’ downloads and similar value offers. However, he also claimed some ISPs will reduce or eliminate purchases from Pipe, since its takeover by a competitor.

“These ISPs will seek international capacity elsewhere, but nobody can quantify the scale of the movement yet,” Kennedy said.

Meanwhile, independent telco analyst, Kevin Morgan, saw value in the combination of TPG’s retail strength and Pipe’s wholesale offerings.

“Paradoxically, despite the hype about a wholesale-only NBN, and the push to get Telstra to divest its network, a vertically integrated model of wholesale/retail has enduring value and in my view, it’s not one that any owner would readily undo,” Morgan said.

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