Telstra and TPG respond to tribunal’s rejection of landmark network sharing agreement

Telstra Group (ASX: TLS) has announced it will “carefully consider” a decision by the Australian Competition Tribunal (ACT) to reject a landmark regional network sharing agreement with TPG Telecom (ASX: TPG).

The proposed multi-operator core network (MOCN) agreement would have allowed TPG to use around 3700 additional regional mobile sites, increasing its current offering by around five times and its mobile network coverage to 98.8% of the Australian population.

Under the terms of the $1.8 billion deal announced in early 2022, Telstra would have bought spectrum (or airwaves which carry wireless internet) and transmission towers from TPG, while TPG would have kept selling 4G and 5G coverage using Telstra infrastructure.

TPG’s mobile network currently reaches 96% of Australians with around 750 sites in regional areas.

The Australian Competition and Consumer Commission (ACCC) ruled against the proposal in December, saying it would not result in the benefits claimed by both companies.

The ACCC is the nation’s competition regulator, while the ACT is a federal court body which reviews appeals against the regulator’s decisions.

Market strength

The ACT said the proposal would give Telstra substantial benefits including increasing its strength in retail and wholesale mobile markets, and would undermine the incentives by rival Optus to invest in 5G technology.

Telstra chief executive officer Vicki Brady said the ACT’s decision was disappointing, particularly in light of strong support for the proposal from regional communities.

“What we have tried to do is take an innovative approach to provide better mobile connectivity, more coverage and more choice for our customers,” she said.

“The agreement with TPG would have delivered these benefits almost immediately and for the long-term.”

Options for appeal

TPG chief executive officer Iñaki Berroeta said the company would review the decision before considering its options for further appeal including a judicial review in the federal court.

“We remain committed to extending the reach and capability of our mobile network to regional Australia and will continue to explore our options to deliver great mobile service and value to our customers,” he said.

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

Mr Berroeta said if the regional network sharing arrangement does not ultimately proceed, future capital expenditure plans may need to be adjusted for higher short-term investment at sites within its existing regional network, which would have been decommissioned or moved to the MOCN.

Spectrum access

Ms Brady said Telstra would also call for a rethink of the policy relating to spectrum access in light of increasing demands for mobile data.

Spectrum refers to the invisible radio frequencies which carry wireless signals and enable the use of mobile devices and apps.

“All mobile network operators are facing the challenge of how to provide more capacity for customers to do all the innovative things they want using our mobile networks from smart farming, mobile health care and remote education, through to kids watching movies on family road trips,” Ms Brady said.

“With mobile data demand currently growing at around 30% per year, there are two ways to add capacity – get access to more spectrum or build more towers.”

She said investing in more towers to add capacity in regional Australia was not always commercially viable or an efficient use of capital or government funds, and would not result in any material increase in coverage.

“As 5G drives increased data usage and with 6G on the horizon, we need to be smarter about how we use our spectrum assets and there is a role for government to look at how we do that more efficiently,” she said.

“At the moment we are limited in the amount of spectrum we can buy at auction and, as today’s decision shows, limited in the type of commercial arrangements we can put in place to improve services for our customers.”