A proposed deal between Telstra and TPG to share and expand their mobile networks in regional parts of Australia has been dealt another blow, with the Australian Competition Tribunal knocking back the agreement.
The deal would have resulted in TPG decommissioning about 700 Vodafone mobile sites in order to use 3,700 Telstra mobile sites in a network-sharing agreement across 4G and 5G. It would have increased the reach of Vodafone’s mobile network in regional and remote parts of Australia – increasing coverage from 96% to 98.8% of the Australian population.
Telstra would have also gained access to 169 TPG sites.
It was initially struck down by the Australian Competition and Consumer Commission in December, and appealed by TPG and Telstra earlier this year.
In an appeal judgment on Tuesday, the competition tribunal president, Justice Michael O’Bryan, said while the agreement would not materially affect TPG’s position in the market, it would further increase Telstra’s competitive position in the market.
“[The] agreement provides Telstra with substantial commercial and competitive benefits and would further increase Telstra’s position of market strength in mobile telecommunications markets at both the retail and wholesale levels,” he said.
O’Bryan said allowing the agreement would harm competition and undermine Optus’s incentives to invest in its 5G network expansion.
“Over time, the network quality gap between the Telstra network and the Optus network would be likely to increase,” he said. “As a consequence, the competitive constraint that Optus currently imposes on Telstra would be likely to weaken, which would enable Telstra to maintain higher prices and margins than would otherwise be the case. The reduction in competitive constraint would also reduce the pressure that Telstra faces to invest in and upgrade its network.”
O’Bryan said the ruling was specific to the Telstra and TPG agreement alone, and said other network sharing agreements would potentially be allowed to improve mobile coverage in regional Australia. He also said that the ruling was not specifically aimed at protecting Optus, but overall competition.
“In circumstances where the retail market is served by three principal mobile network operators is highly concentrated, and Optus is the second largest competitor, a material reduction in the competitive constraint able to be imposed by Optus would be likely to have the effect of substantially lessening competition in the market.”
The Optus CEO, Kelly Bayer Rosmarin, said the company was delighted by the decision.
“This reinforces the importance of infrastructure-based competition and investment in our communications sector that will have lasting benefits for regional Australia,” she said in a statement.
“This is a good outcome for our regional communities as it will mean they will continue to benefit from competition as Optus reaffirms its commitment to providing Australia’s regional communities with a strong network and great service.”
The Telstra chief executive, Vicki Brady, said in a statement to the Australian Stock Exchange the outcome was disappointing and Telstra would closely consider the ruling.
“What we’ve tried to do is take an innovative approach to improve experiences for our customers and to answer calls from stakeholders, including governments, to provide better mobile connectivity, more coverage and more choice for our customers. The agreement with TPG would deliver these benefits almost immediately and for the long-term,” Brady said.
Brady said policymakers needed to rethink how radio frequency spectrum access was allocated as more and more mobile data was used.
“Spectrum needs to be made available to those who can use it most effectively for the benefit of customers. All mobile network operators are facing the ongoing challenge of how to provide more capacity for customers to do all the innovative things they want using our mobile networks,” she said.
The TPG CEO, Iñaki Berroeta, said in a statement to the ASX, the ruling entrenches the status quo in regional mobile coverage.
“We are not giving up on regional Australia and will consider our options as well as advocating for policy reform that will deliver greater competition and choice in the regions that need it most,” he said.
TPG said it would consider an appeal to the federal court. Only a summary of the ruling has been made available, with TPG and Telstra being given time to redact commercially sensitive parts of the full decision before it is released publicly.
