What does the end of TPG's mobile network mean?

What does the end of TPG's mobile network mean?

Boost mobile Peter Adderton and telco consultant Paul Budde explain the consequences


Industry specialists believe that TPG ceased the rollout of its mobile network for many reasons but not because of the Government ban on Huawei equipment.

Telecommunications consultant Paul Budde referred to the Huawei ban as a "great excuse for the company to abandon its ambitious infrastructure plans".

"Building such a new network doesn’t make economic sense, especially within the context of a merger with Vodafone. This, in essence, would mean that the merged entity would have two separate mobile networks which would largely overlap each other’s markets," Budde wrote in a blog post.

Boost Mobile founder Peter Adderton is of a very similar view, saying the ban simply gave TPG an "easy way out they were desperately" seeking.

"The last time I checked there are other suppliers that TPG could have used to build a network if they were truly serious about it, but I would suggest that the numbers on TPG’s supposed ‘$9.99 per month unlimited wireless data deal’ were not ever profitable enough for such a commitment," Adderton said.

At the time, TPG explained that its mobile network plans were based on small cell architecture and that the principal equipment vendor selected was Huawei.

In fact, TPG said it had already invested $100 million in the network and that Huawei had been selected as it provided a simple upgrade path to 5G.

Prior to TPG's announcement, the Australian Competition and Consumer Commission (ACCC) raised concerns over the proposed merger between TPG and Vodafone.

Specifically, on its potential impact on Australia’s mobile and broadband markets since, in the view of ACCC, TPG is on track to become the fourth mobile network operator in Australia.

“We therefore have preliminary concerns that removing TPG as a new independent competitor with its own network, in what is a concentrated market for mobile services, would be likely to result in a substantial lessening of competition," said Rod Sims, ACCC chair, at the time.

"If TPG remains separate from Vodafone, it appears likely to need to continue to adopt an aggressive pricing strategy, offering cheap mobile plans with large data allowances.”

Boost Mobile's Adderton believes the ACCC should look at TPG's announcement and question its intent to merge with Vodafone.

"Given TPG is a MVNO [mobile virtual network operator] when it comes to wireless, the ACCC needs to step back and look at what they’re actually now assessing. What type of entity are they now considering to either approve or block in a merger?"

MVNOs buy mobile capacity from the network operators who then can built their own products and services on top of the mobile infrastructure of the network operators, Budde explained.

"Currently this market is hampered by the fact that MVNOs are subject to the whims of the network owners, who can change prices and condition at their will.

"Such market uncertainties have, over the last 20 years, resulted in negligible growth of this market, their overall market share has – for all those years – remained stable at around only a few percentage points of total mobile subscribers, added Budde.

If TPG became a MVNO on the Vodafone network it could be able to offer the $9.99 monthly plan it had planned. However, Budde believes, if TPG would follow that track the ACCC will no doubt argue that Vodafone would have to provide similar transparent wholesale deals to other MVNOs.

"In such a situation the network operators will, in all likelihood, object to such regulation and if as a result of their objections the ACCC will decide that the mobile market indeed remains closed, it would be very difficult for TPG to become a strong competitive force in the mobile market, it might than become just one of those other MVNOs struggling to make a living from the crumbs that the network operators will leave on the table for them," explained Budde.

Adderton said that there is very little regulation around how carriers can treat MVNO’s and wholesalers

"To keep things competitive in-market we are calling on the ACCC to protect these parties and ensure that at least 30 per cent of the traffic on a mobile network comes from a wholesaler," Adderton said. "Otherwise, this merger is nothing more than just a 'get-out-of-jail-free' card for TPG and Vodafone shareholders."

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Tags VodafoneacccHuaweiTPGmobile network

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