TPG mobile network to be complete in Sydney, Melbourne by mid-2018

TPG's AU$1.9 billion Australian mobile network will make use of small cells, macro cells, and fibre assets, with coverage expected to be across Sydney, Melbourne, and Canberra by June 2018.

TPG has announced that its AU$1.9 billion Australian mobile network build-out has made "strong progress", with the network expected to be complete across Sydney, Melbourne, and Canberra by mid-2018.

Progress on this network has involved signing contracts with technology partners on mobile sites, small cells, and macro cells, with TPG focusing not only on 4G readiness but also on preparing for 5G.

"In Australia, where the initial network implementation is concentrated on the country's most densely populated areas, the group has already entered into agreements with multiple partners to gain access to a large volume of sites to provide coverage of major metropolitan areas," the telecommunications provider said during its FY17 financial results presentation.

"TPG's strategy is to deploy a primary small cell network across metropolitan areas, complemented by a traditional macro network.

"TPG has entered into agreements with multiple partners across Australia to be used for both the small cell and macro network providing a significant number of sites to cover major metropolitan areas.

"A higher density of small cell sites will be used for the initial 4G LTE rollout, and will also provide key infrastructure assets for the longer-term 5G evolution."

TPG said it intends to utilise both its 700MHz and 2600MHz spectrum holdings, as well as its fibre assets.

"Mobile radio network planning, site selection, and acquisition is already well under way in major metropolitan areas," it added.

"Implementation of some initial site clusters in Sydney, Melbourne, and Canberra is currently expected to be complete by mid-2018. The agreements with our site partners, coupled with the use of small cells, facilitate a simplified approval process that utilises existing planning regulations, speeds up deployment, and assists site selection."

TPG spent only AU$6.3 million in capex on its mobile networks during the most recent financial year, ahead of an expected acceleration during 2018.

"Aside from spectrum purchases, there has not yet been any significant mobile network expenditure. This will commence in FY18," TPG explained.

The company, which currently wholesales Vodafone's 4G network while building its own out, had 445,000 mobile subscribers in total as of July -- 155,000 on iiNet and 290,000 on TPG.

For the financial year, TPG announced net profit of AU$413.8 million, up 9 percent from AU$379.6 million a year ago, on revenue of AU$2.49 billion, up 4 percent.

Earnings before interest, tax, depreciation, and amortisation was AU$890.8 million, up 5 percent from AU$849.4 million.

TPG's consumer segment contributed the bulk of the revenue, at AU$1.74 billion -- AU$1.38 billion from broadband, AU$165.4 million from fixed voice, and AU$118 million from mobile -- which it attributed to contributions from iiNet, as well as National Broadband Network (NBN) and fibre-to-the-building (FttB) subscriber growth.

Its corporate segment brought in AU$743 million revenue, driven by strong data and internet sales and margin expansion. Of this, AU$526.1 million was from data/internet, AU$147.1 million from voice, and AU$69.8 million from legacy iiNet.

Broadband subscribers numbered 1.936 million in total, 979,000 from iiNet and 957,000 from TPG. TPG's broadband subscribers were broken down into 37,000 FttB customers, 28,000 off-net ADSL, 110,000 on-net ADSL; 520,000 on-net ADSL bundle; and 262,000 NBN customers.

TPG gained 143,000 NBN subscribers during the year, while iiNet gained 142,000 NBN customers for a total of 299,000.

TPG's capital expenditure spend during FY17 was AU$576.3 million, with AU$124.4 million spent in the Singapore spectrum auction, AU$73.1 million in the Australian 1800MHz auction, and AU$10 million in the Australian 700MHz auction.

It also spent AU$100 million on an "acceleration" of its AU$900 million deal with Vodafone Australia to build out a 4,000-kilometre fibre network, which it said is on schedule and on budget to be completed during FY18, as well as on the acquisition of additional international capacity.

According to market research company Kantar, the quarter ending June 30 saw TPG/iiNet hold 2.3 percent of the total Australian mobile market, gaining 0.1 percentage point in prepaid for a total of 7.7 percent of the market, and losing 0.8 points in post-paid for 2.8 percent market share.

TPG is now in the midst of raising AU$400 million to help fund its Australian network, after announcing earlier this year that it would become the fourth mobile operator by using its purchase of 2x 10MHz of mobile broadband spectrum in the 700MHz band and combining this with its existing holdings in the 2.5GHz and 1800MHz bands.

"TPG will build a mobile network in Australia using current advanced technology for AU$1.9 billion, comprising AU$600 million for network rollout capital expenditure over a three-year period to achieve 80 percent population coverage; and AU$1,260 million for the 700MHz spectrum, which will be payable in three annual instalments," TPG said in April.

"The network would provide broad coverage across densely populated areas of the country with approximately 2,000 to 2,500 sites. TPG estimates that its mobile network would be EBITDA break-even with 500,000 subscribers."

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