Iñaki Berroeta, CEO (TPG Telecom)
TPG Telecom has signed a decade-long network sharing deal with Telstra, giving it access to 3,700 of the latter's mobile network assets.
As a result of the agreement, which could be extended by a further decade, TPG will decommission around 725 mobile sites it currently operates within Telstra's coverage area.
Meanwhile, Telstra will obtain access to and deploy infrastructure on up to 169 of TPG Telecom’s existing mobile sites as well as some of its existing 4G and 5G spectrum in regional areas.
TPG Telecom CEO Iñaki Berroeta called the multi-operator core network (MOCN) deal a “landmark” agreement that "represents a material uplift in the capability of [TPG's] network".
The telco also claimed the deal would benefit shareholders and customers, as it avoids future capital expenditure and operating costs associated with the TPG Telecom regional sites to be decommissioned and that of expanding TPG Telecom‘s mobile network coverage into regional Australia.
However, the deal will incur some initial costs for TPG, including a $150 million recognition of onerous lease related charges and a write-down to the value of network infrastructure assets of up to $75 million.
Decommission costs may also reach up to $50 million. The network-sharing deal could come into effect by the end of 2022 subject to regulatory approvals.
TPG Telecom will meanwhile continue to operate its own 3G, 4G and 5G networks in metropolitan areas reaching around 80 per cent of the population, which includes its network infrastructure sharing arrangement with Optus in those areas.
At the end of last year, TPG Telecom put plans forward to the Australian Competition and Consumer Commission (ACCC) to undergo a "functional separation".
This will allow TPG to compete in both wholesale and retail superfast broadband services markets for residential customers and expand its fixed lined network footprint.
Meanwhile, Telstra's CEO Andy Penn noted that the MOCN deal would provide TPG Telecom with the opportunity to access some of the telco's network assets within a defined zone".
"The access is similar to the way Telstra currently provides wholesale services to its MVNOs and Belong in this zone," he said.
“Similar to monetising our passive infrastructure, it allows Telstra to have an innovative way of monetising some of our active mobile infrastructure, in areas where the population coverage is much smaller and more challenging in terms of returns and further investment and where there are already a number of competitors.
“Additional scale from this agreement therefore supports return on invested capital in these areas and makes ongoing investment in the network and innovation more sustainable.”
Last year, Telstra announced plans to spin off its infrastructure assets as part of its broad T22 transformation strategy, selling off close to half of its Towers business for $2.8 billion.
Telstra’s Towers organisation, which is part of the company’s InfraCo infrastructure business, is the largest mobile tower infrastructure provider in Australia, with approximately 8,200 towers in its network.
The business is now owned by a consortium comprising Future Fund – the Australian government’s sovereign wealth fund – as well as the Commonwealth Superannuation Corporation and Sunsuper, who together will become a strategic partner in Telstra InfraCo Towers as the minority shareholder in the business.
