TPG to build its own mobile network

Telstra shares fell today after internet provider TPG Telecom said it would build Australia's fourth mobile network for about $1.9 billion, after securing much-needed mobile spectrum in a government auction.

TPG to build its own mobile network
Telstra shares fell 6 per cent this morning on news TPG is building an Australian mobile network.

Telstra shares fell today after internet provider TPG Telecom said it would build Australia's fourth mobile network for about $1.9 billion, after securing much-needed mobile spectrum in a government auction.

iiNet parent TPG has secured premium spectrum in the 700 megahertz band for $1.26 billion, and will spend a further $600 million building a mobile network consisting of equipment that will be deployed at up to 2,500 sites, plus small cell sites across the country, that will cover 80 per cent of the population.

“Through its existing business and infrastructure, TPG has most of the essential components of a mobile network operator already in place, including Australia’s largest national dark fibre network, call centres and back-office systems supporting over 2 million customers across the consumer, business, corporate, government and wholesale segments,” TPG said.

“There are also numerous ‘new entrant advantages’ that TPG will be able to enjoy, including being able to deploy current advanced technology, the rollout of fewer sites, and not needing to support legacy equipment for 2G/3G networks.”

Executive chairman and chief executive David Teoh said the spectrum acquisition was a tremendous development for the long-term future of TPG, Australia's second largest fixed-line internet provider behind Telstra.

"We are uniquely positioned to leverage our success in the Australian fixed-line broadband market to drive the next phase of growth for TPG's shareholders and bring new competition to the Australian mobile market," he said.

Mr Teoh said the company's mobile strategy would complement its broadband business, with TPG's ability to bundle services expected to prove beneficial.

TPG's churn rate - the number of customers leaving the group - was 1.4 per cent in the first half ended January 31.

The announcement of a rival to Telstra, Optus and Vodafone Australia in the mobile market had an immediate impact on Telstra shares, which continued falling throughout the day to close 7.4 per cent lower at $4.22 each.

Telstra was not eligible to participate in the latest spectrum auction, while Vodafone Australia secured some mobile spectrum for $286 million.

TPG shares, which closed at $6.66 yesterday, were placed in a trading halt today, pending the completion of a $400 million capital raising to help fund its spectrum acquisition.

TPG says it will fund the Australian rollout and spectrum purchase over the next three years through a combination of operating cashflows and existing and new debt.

The company is also in the early stages of rolling out a mobile network in Singapore, and has reaffirmed its forecast of underlying earnings between $820 million and $830 million in 2016-17.

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