TPG wants to get bigger and bigger and...

[misi]

Telstra shares slump as TPG moves to build mobile network

Telstra shares have plunged nearly 7 per cent to the lowest in nearly five years after rival, TPG Telecom, said it would spent around $1.9 billion on a building a new 4G mobile phone network after winning a government tender.

TPG told the Australian stock exchange that it successfully bid for 700MHz mobile spectrum at a recent auction conducted by the Australian Communications and Media Authority (ACMA).

TPG said it plans to spend $600 million on rolling out a new 4G mobile network over three years, which will reach around 80 per cent of the population.

The rollout will begin next year and the licence will run from April 2018 until late 2029.

The company will pay nearly $1.3 billion in three annual instalments for the mobile airspace.

TPG said it will pay for the rollout by selling $400 million worth of new shares, loans and by using operating cash flow.

Telstra was banned from bidding in the airspace auction because of its position as the dominant market player.

That is bad news for the Telstra shareholders.

And the good news for the mobile service customers:

TPG promises 'new competition' in mobile market
In a statement, TPG executive chairman and chief executive David Teoh said the acquisition of the mobile airspace was a tremendous development for the future of the company.

"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," Mr Teoh said.

"We believe that our mobile strategy will be complementary to our ongoing fixed line business with the ability to bundle mobile and fixed services expected to have a beneficial effect on our already low fixed services customer churn."

TPG said it expected to benefit from its new entrant status against existing players, Telstra, Optus and Vodafone Australia, because it would use 4G mobile technology in its network, the most advanced mobile broadband technology which needed fewer mobile towers.

Unlike the incumbents, TPG said it had no legacy equipment to maintain and no existing customer revenue to protect.

Vodafone Australia will pay $286 million for additional mobile airspace.

Bad news for the TPG shareholders:

Concerns have also been raised about the $2 billion that TPG plans to spend on rolling out its mobile network.

That figure is a drop in the ocean compared to the money spent by Telstra and Optus on upgrading their networks.

Perhaps that was a little too big bite to chew?