What The TPG/Vodafone Merger Means For The NBN

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Vodafone Australia and TPG have ended a week of speculation by confirming plans to merge into a $15 billion company. The combined company reckons it will be powerful enough to take on the twin Goliaths of Telstra and Optus - but the numbers tell a different story when it comes to broadband.

Analysis of NBN wholesale data from the ACCC shows that TPG is already the second-biggest player, behind Telstra. As of mid-year, it has 904,997 connections across the various NBN access technologies, which puts it well behind Telstra (2,051,396) but close to double the number at Optus (562,238). Adding in the (relatively small) number of Vodafone broadband customers won't change its #2 position, but it will reinforce its dominance as the biggest Telstra alternative.

(On a side note, remember how the NBN was supposed to have opened up the Australian broadband market to new competitors? Not happening on any great scale, is it?)

Anyway, the notion that TPG is coming into this fight as a minnow doesn't stack up. With around 19% of the market, Vodafone is demonstrably the smallest of the three mobile network owners in Australia. So what happens to broadband when you mash them together?

Most of the attention right now is on the big-picture figures for the merger, rather than what future broadband products might look like. Vodafone has stressed that it's not anticipating any changes to its existing product range for some time. That's good news especially for travellers, since its $5 a day international roaming deal remains the pick of the bunch for Australians heading overseas right now.

In the long run, however, history suggests that Vodafone's plans for broadband will end up looking extremely similar or identical to TPG's existing offerings. We've seen that pattern with plans from iiNet and its subsidiary brands like Internode following the TPG acquisition of iiNet back in 2015. The brands still exist, but the product is essentially the same. Pay $69.99 a month and you can have unlimited NBN access.

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TPG currently stands as the second largest internet service provider (ISP) in Australia and is a force to be reckoned with in the telecommunications industry. Its rapid growth is mainly attributed to strategic acquisitions it has made in recent years. One of those acquisitions was iiNet, an ISP that boasted high customer satisfaction rates and was well-respected in the telco community.

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Of course, there are limits to how much variation TPG (or any other provider) can offer with an NBN service, since ultimately everyone is hooking into the same network. Checking out the range of plans in Finder's broadband database, the main areas of variation are in install fees and claimed peak-hour performance.

That said, the push for standardisation means that it's likely that Vodafone's current 4G Backup offer, which lets you use a 4G SIM card for access if there's a delay while your NBN service is activated, will eventually disappear. Here's why.

One of the big selling points for the merger is the fact that it will lead to efficiencies in back office processes (and hence save money, presumably while also seeing quite a few employees lose their jobs). A provisioning process that requires setting up a 4G account as well as an NBN connection is never going to be as efficient as one that doesn't. Given that in five years there won't be any alternative to being connected to the NBN, 4G Backup always had a limited shelf life, but I suspect it will be more limited now.

Elsewhere, we can expect to see a lot of cross-selling and bundling deals. If you go into a Vodafone store to buy your next iPhone, you'll be heavily pitched to switch your broadband over as well. That tactic has been a key part of how Telstra has maintained its dominant position. TPG has already tried for that tactic with its existing mobile plans (which already use the Vodafone 4G network), but it will be much more prevalent now.

Is this good news for consumers? On the mobile front, it would have been interesting to see the impact of TPG building its own competitor network, something that won't be happening anymore. But in broadband, it's largely a case of more of the same. To get the best value, you'll definitely want to shop around, and not just fall for the lure of a well-known brand.

Angus Kidman is editor-in-chief for comparison site finder.com.au , a former editor for Lifehacker Australia and a man who sometimes feels he has spent too much of his life thinking about NBN congestion issues. Follow him on Twitter @gusworldau.


Comments

    this is horrible! I just changed plans from vodafone to tpg!!

    I hope this isn't going to be another Vodafail, or in this case TPGfail. I have been a Vodafone customer for a long time and was just happy that in the last few years it had recovered well - but am not happy about the TPG takeover (let's call it what it is - a takeover, not a merger).

    TPG service was not as good as iiNet's, so it will be interesting to see what happens to Vodafone service.

      Vodafone has a 50.1% stake in the new entity, so not a takeover.

    Tpg are not taking over. This is easily deducible from the fact that the current VHA owners will be taking a majority of the shares in the new business (50.01% vs 49.99% for the TPG side). They are taking the TPG name because it has the more favourable brand recognition in Australia.

    For another example of this, see when the owners of Chicken Treat purchased Red Rooster and rebranded many of the stores to Red Rooster.

      They are taking the TPG name because it has the more favourable brand recognition in Australia.
      Of the two brands I know who I'd rather buy services from.

        I have FTTP 100/40 with TPG and Unlimited Red Plan with Vodafone... and never had an issue with either, so winwin?

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