TPG-Vodafone will be 'very aggressive': David Teoh

The new TPG could offer plans that are 'even better' than its previously advertised AU$9.99 per month mobile service, David Teoh has said, once the merger completes and it can offer bundled fixed and mobile deals.
Written by Corinne Reichert, Contributor

TPG CEO David Teoh has said a merged entity combining his company with Vodafone Hutchison Australia will be "very aggressive", with the new telco to possibly provide better pricing on bundled fixed and mobile offers than its previously announced AU$9.99 a month plans.

"With the merger of the two companies, I think we are going to be a leading challenger, and we are going to be very aggressive; we are going to bring value to the consumer," Teoh said during a call with media on Thursday morning.

"It could be much better [than AU$9.99] ... if you bundle [fixed] with the mobile, it could be even better, who knows. We want to create value propositions for our customer base and for the consumer. The market is massive, massive, the opportunity is massive."

Teoh also said work will need to be done in combining TPG's small cell mobile network that is currently being -- and will continue to be, regardless of merger talks -- rolled out with Vodafone's macro networks.

"We have put a lot of money in the spectrum and in the planning on our start to roll out a very dense mobile network," he added.

On how the Australian government's national security-focused Huawei ban -- handed down last week during the political unrest in Canberra -- might affect the telcos' deployment of 5G, Vodafone Australia CEO Inaki Berroeta told ZDNet that he will not be privy to TPG's 5G plans until after the merger is approved but said the ban will constrain the market.

"What I can tell you is that effectively reducing the choices that the market has in terms of moving forward with new technologies, it always has an impact," Berroeta told ZDNet.

"But at the same time, because we are combining both businesses, and we are combining two infrastructures that are very complementary, what we are doing here is enhancing dramatically the number of choices that we have in the way that we design the future architectures.

"I think that ultimately, the decision around the vendors that we'll be choosing is a constraint -- it's actually more a constraint on the market -- I do think that this merger gives us a lot of opportunities to be able to choose all the vendors we have to."

Australian Communications Consumer Action Network (ACCAN) CEO Teresa Corbin, meanwhile, expressed concern that the merger will reduce customer choice across mobile and fixed-line services, also pointing to the possibility of "an eventual consolidation of products".

"However, we acknowledge that the new entity of TPG Limited may have greater market power to place pressure on Telstra and Optus to lower their prices, increasing affordability for consumers," Corbin added.

"We hope that the merger will result in greater investment in infrastructure, such as 5G technology, and ultimately increase the availability of reliable, accessible, and affordable telco services across Australia."

Boost Mobile CEO Peter Adderton, on the other hand, said the Australian Competition and Consumer Commission (ACCC) should reject the transaction "unless the new company offers safeguards to protect virtual network operators".

"The ACCC also needs to ensure that this new entity, as well as both Optus and Telstra, offer these safeguards especially after this horizontal merger. It will be brands like Boost Mobile that will be crucial in maintaining a healthy and competitive market," Adderton argued.

"The question is simple: Will the new Voda CEO of the merged entity honour TPG's previously aggressive six months for free, AU$9.95 per month offer? My guess is they both might get a case of amnesia on this one.

"I don't believe that TPG ever had the intention to build a full, nationwide network. There's a huge capital cost to do that, and with the amount of money it would take, such an idea was never going to be profitable. This was only ever a game of poker."

According to Adderton, the merger would be "terrible" for consumers, because having a fourth mobile network would have brought pricing down.

"Even the concept of a fourth network still drove down prices and drove more consumer-friendly activity from the traditional three carriers than ever existed before their announcement," he said.

TPG and Vodafone Australia had on Wednesday morning announced that they will proceed with their merger -- after confirming that they had entered discussions last week -- to form a telecommunications giant that they say will have an enterprise value of around AU$15 billion.

The new TPG will see Berroeta serve as CEO and Teoh as chair, and will produce revenue of AU$6 billion, earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$1.8 billion, and have an operating free cash flow of AU$900 million, the companies have claimed.

It will be owned 50.1 percent by Vodafone Australia shareholders and 49.9 percent by TPG shareholders, and expects to hold 20 percent of the Australian mobile market, and 22 percent of the fixed-line broadband market upon merging.

"The merger will create a more effective challenger to Telstra and Optus, with an integrated fixed and mobile offering and a pro forma enterprise value of approximately AU$15 billion," the companies said in a joint announcement.

Prior to the merger announcement, TPG had been set to launch its AU$1.9 billion Australian mobile network in the second half of 2018 across Sydney, Melbourne, and Canberra, with the telco in March announcing the installation of sites in Sydney and Melbourne.

TPG currently wholesales Vodafone's 4G network under a AU$1 billion deal that also involved TPG building out a 4,000-kilometre fibre network for Vodafone to launch a fixed-line National Broadband Network (NBN) offering.

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