Fixed and mobile assets a good combination for 5G upgrade
Change is afoot in the Australian telco space with the potential merger of Vodafone subsidiary Vodafone Hutchison Australia and TPG Telecom. The companies characterize the merger as better positioning the combined company to compete against Telstra and Optus, while also funding enhancements to both mobile and fixed network infrastructure in the run up to 5G.
GlobalData Technology Analyst Siow Meng Soh concurred with the improved competitive market position and noted the opportunity the combined company will have as it relates to upgrading the combined network.
According to a research note, “With the 5G spectrum auction around the corner, TPG will need to inject more cash to obtain 3.6 GHz spectrum while it does not yet have paying customers on its mobile network. Moreover, joining forces with VHA gives TPG greater bargaining power with a smaller number of 5G equipment suppliers…From VHA’s perspective, it needs to start planning and implementing 5G to avoid lagging too far behind Telstra and Optus. The tie-up will benefit the two in terms of cost avoidance in network investment and speed up 5G rollout. VHA’s 5,000 mobile sites and TPG’s fixed assets (27,000 km+) for backhaul will enable the merged entity to accelerate 5G implementation.”
Australian authorities earlier this month announced a decision to prevent certain vendors from taking part in the rollout of next-generation mobile networks across the country, effectively banning Chinese companies Huawei and ZTE from involvement.
“Government has expectations of the application of the Telecommunications Sector Security Reforms (TSSR) obligations with respect to the involvement of third-party vendors in 5G networks, including evolution of networks leading to mature 5G networks,” a joint statement by Communications Minister Mitch Fifield and acting Home Affairs Minister Scott Morrison said.
Huawei has argued that the move was politically motivated and will hurt consumers. According to the Chinese infrastructure giant, “A non-competitive market will raise the cost of network construction and have lasting effects on Australia’s transition to a digital economy. In the end, everyday businesses and consumers are the ones who will suffer the most from the government’s actions.”
The $15 billion transaction would leave TPG shareholders with 49.9% of the shared company and VHA owners with majority 50.1% control.
