Over the next three years, TPG will spend $600 million to build a mobile network that it claims will reach 80 per cent of Australians. Here’s what we know about it so far.
The rollout will involve 2000-2500 sites, at about $240,000 each, and TPG will commence building the network in 2018. It estimates it will need 500k subscribers to break even, and hopes it can attract customers by bundling mobile services with its existing fixed line services, consisting of 21,000km of fibre optic cable.
The project will be partially funded by a $400 million entitlement offer at $5.25 per new share, as well as new debt, and its existing cashflow. In addition to the cost involved in building this network, TPG has already committed to spending $1.2 billion on the 700MHz spectrum rights through to December of 2028.
Vodafone executive Dan Lloyd has said there’s no way TPG can build a decent mobile network for only $600 million. He says it costs around that much for Vodafone to maintain and improve its existing network, and that building a mobile network in a geograchically large, yet low population country like Australia is “courageous and challenging”.
Given TPG’s existing practice of purchasing network space from Vodafone and targetting budget consumers, it’s likely to see similar activity once the network is built — and while all the noises coming from TPG are about how the network will be high quality, it’s possible we could see a “you get what you pay for” situation.
Shares of both TPG and Telstra took a hit after the announcement.
As Finder noted, TPG’s potential launch window lines up nicely with the expected arrival of 5G, and TPG also alluded to “current advanced technology” in its ASX statement as an advantage of building a new network.
Kidman also makes a very good point in that population coverage is very different to geographical coverage, so TPG’s claim of 80% could well mean metropolitan areas and not much else — which might be a relevant factor for anyone visiting their family in the country.