Optus/TPG MOCN approval good for industry ROIC

The ACCC's decision to allow regional network sharing strengthens retail competition and supports infrastructure investment.

David Kennedy · Venture Insights6 September 2024Period: September 20244 min read

2,444↑

Optus regional sites TPG will gain access to

2026→

Year TPG capital expenditure is forecast to peak

Locked

Companies covered:

Abstract

This report analyses the ACCC's decision not to oppose the regional mobile network and spectrum sharing agreement between Optus and TPG. The deal allows TPG access to 2,444 Optus regional sites, while Optus gains access to TPG's spectrum to increase data bandwidth. This arrangement is expected to improve the return on invested capital (ROIC) for both operators by reducing TPG's capex requirements and generating incremental wholesale revenue for Optus, while intensifying regional 5G competition for Telstra.

Key Takeaways

The ACCC approved the Optus/TPG regional network sharing deal, reversing the competitive threat posed by the rejected Telstra/TPG proposal.
TPG gains access to 2,444 Optus regional sites, allowing for expanded coverage and improved service quality for its customers.
Optus will utilize TPG's spectrum to increase data bandwidth and speeds, accelerating its regional 5G and backhaul rollout.

Create a free account to keep reading

stakeholder implications · PDF download

Frequently Asked Questions

The deal introduces a formidable second regional network by giving TPG access to 2,444 Optus sites, effectively ending Telstra's historical dominance in these areas. This shift accelerates 5G competition and provides TPG with a coverage footprint it previously lacked without the need for massive independent builds.

The partnership significantly improves return on invested capital (ROIC) by allowing TPG to delay heavy infrastructure spending until its capex peaks in 2026. Optus gains immediate financial upside through incremental wholesale revenue and the use of TPG’s spectrum to increase data bandwidth.

The regulator view is that this specific MOCN agreement preserves a three-player market structure rather than consolidating power with the incumbent. This is a critical intervention for an industry where currently only 1 major operator is covering its cost of capital.

While the deal improves efficiency, it does not fully offset the fact that telco pricing continues to lag behind CPI. Operators must still pursue long-term price adjustments to sustain the digital infrastructure investment required for regional 5G and backhaul rollouts.

Optus/TPG MOCN approval good for industry ROIC

Abstract

Key Takeaways

Frequently Asked Questions

Unlock the full report

Free

Lite

Team