Telstra-TPG deal rejected by ACCC

The Australian Competition and Consumer Commission (ACCC) has blocked a network sharing deal between Telstra, Australia’s largest telecom operator, and TPG Telecom, the country’s second MNO.

First announced in February, the spectrum and tower sharing deal, which was expected to be around AUS$1.7 billion, would have seen Telstra acquire around 3,700 TPG sites, while allowing TPG to continue to sell 4G and 5G services to customers. The two MNOs have said they will be appealing against the decision according to Reuters as they view this as a missed opportunity for 17% of Australia’s population who could have benefitted from the infrastructure sharing deal.

The announcement by the antitrust regulator flags tangible risks over fewer investments in critical infrastructure. “We examined the proposed arrangements in considerable detail. While there are some benefits, it is our view that the proposed arrangements will likely lead to less competition in the longer term and leave Australian mobile users worse off over time, in terms of price and regional coverage” said Liza Carver, ACCC Commissioner.

“Mobile network operators compete on price and a user’s package inclusions, but importantly, they also compete on coverage, speed and other quality dimensions that are directly influenced by the nature and extent of their underlying network infrastructure”.

On Telstra’s position in the market, the Commissioner said: “Telstra is already the strongest mobile network operator in Australia and has a very high share of regional customers. We consider that the proposed arrangements would lock up valuable spectrum with Telstra, raising barriers to entry and expansion and reducing the incentives and ability of rivals to compete”.

According to Reuters the country’s third MNO, Optus, who had previously voiced its concerns over the deal and Telstra’s market dominance has now welcomed the antitrust ruling. Optus CEO Kelly Bayer Rosmarin said, “By knocking back this deal, the ACCC has helped ensure that our regional communities will continue to benefit from competition”.

The ruling slightly negatively impacted TPG’s shares – they dropped by 3% as the decision was announced while Telstra shares remained flat. Some market analysts have speculated that if an appeal is unsuccessful there could be further impacts, especially for TPG.

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