Executive summary

Capital efficiency is the new driver of wholesale market structure.  Regulation has long been a driver of the shape of wholesale markets, and Australia and New Zealand have structurally separated fixed wholesale markets as a result. But recent moves to structurally separate telcos and create new wholesale markets have been driven by pressure on telcos to increase capital efficiency. The unbundling of infrastructure and service exposes assets with different risk/return profiles, enabling more accurate and generally higher valuations and creating optionality for sales. Examples include the creation of Telstra InfraCo and the spinoff of tower assets.

Australia and New Zealand already have highly separated markets. ANZ fixed wholesale markets stand out globally with their 100% structurally separated models, in which the NBNCo, Chorus, and other Ultra Fast Broadband (UFB) providers play a central but highly regulated role. These national broadband wholesalers now dominate overall fixed wholesale revenues. In Australia, alternative fibre providers have also made an impact, principally TPG and Uniti.

More recent moves are driven commercially. Telstra, Optus, TPG, Spark, 2degrees, and One NZ have all made prominent moves to functionally separate (at management level) or structurally separate (at ownership level) infrastructure assets in recent years. Major acquisitions to broaden the retail and wholesale offer have also occurred.