TPG to deploy $2bn mobile network

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TPG to deploy $2bn mobile network

A new rival to Telstra, Optus and Vodafone.

TPG is set to become Australia’s fourth mobile network operator with a $2 billion investment to cover 80 percent of Australia’s population.

The telco paid $1.26 billion - well over the reserve price - for 20 MHz of digital dividend spectrum at an auction held by the federal government.

It has now revealed it will spend a further $600 million on “network rollout capital expenditure over a three-year period”.

Construction is expected to begin in 2018 and will involve antenna and equipment deployments at between 2000 and 2500 sites nationwide.

TPG will also deploy an undisclosed number of additional "small cells".

It expects to begin trial services on a limited portion of its network sometime next year.

The company already has substantial dark fibre assets that it can use for mobile backhaul.

TPG confirmed it had "thousands of potential sites for deployment of mobile antennas already connected to that fibre network", indicating likely infrastructure-sharing arrangements.

However, these are unlikely to be existing towers. Instead, TPG indicated it wanted to place antennas on the rooftops of "thousands of metro buildings" that have existing TPG fibre connections.

It said it was already negotiating for rooftop access to begin installing its antennas.

Customer acquisition

TPG said its network would have an “EBITDA break-even” of 500,000 subscribers.

It already has 453,000 customers as part of a mobile virtual network operator (MVNO) business. TPG's own MVNO customers - 288,000 - back onto the Vodafone network, while the remaining customers are of iiNet Mobile, which backs onto Optus.

TPG confirmed in an investor presentation that it will look for "cross-selling potential" in the group MVNO subscriber base, potentially signalling a move to bring those subscribers on-net.

But its initial interest is also upselling its fixed internet subscribers to on-net fixed and mobile bundles.

"We believe that our mobile strategy will be complementary to our ongoing fixed line business, with the ability to bundle mobile and fixed services expected to have a beneficial effect on our already low fixed services customer churn," TPG CEO David Teoh said.

Signals aggression

The telco said it would use a mix of operating cash flow and new and existing debt facilities to fund its spectrum purchase as well as the network rollout.

It said it had advantages over other mobile telcos in being able to deploy the latest technology without having to worry about legacy mobile infrastructure.

And it signalled an intention to be "aggressive" in its customer acquisition strategy, sounding a clear warning to its now-rivals.

"[We'll be able to] win market share through aggressively priced plans with no existing customer base ARPU [average revenue per user] to protect," TPG said in an investor presentation.

Until now, it has been speculated that TPG's interest in radiofrequency spectrum and LTE technology was likely to be for a future fixed wireless play.

iTnews reported in August last year that TPG was bringing on engineers to "design and implement an LTE network".

However, until today TPG's spectrum assets were a chunk of 2.5 GHz which it bought for $13.5 million back in 2013, as well as some 1800 MHz spectrum.

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