TPG Partners with Vodafone – Should Telstra and Optus be Worried?

TPG Telecom, a company whose strength typically resides in fixed line internet provision (less so, the mobile sector) has made a recent announcement that they will partner up with Vodafone Hutchison Australia (VHA) in a $1bn deal. Vodafone will be providing their optical fibre infrastructure to TPG, in return for TPG’s subscriber base of 320 000 users.

This comes at a time when TPG seeks to boost its fibre optic reach across the country in preparation for emerging competitors such as M2-Vocus and in preparation for rivalling the Federal Government’s NBN. The company also has 5G preparations ongoing.

Three things we can learn from this partnership:

1.  Those 320 000 users that will join VHA are sourced from TPG’s original partnership with Optus in providing the mobile services. This means Optus is taking a hit, and TPG is collaborating with the underdog, VHA – essentially TPG will be acting in a strategic, almost Robinhood-like capacity.

2. As a result, competition is likely to stiffen. Competition is good for us, the consumers. It could translate into better prices and/or increased data offerings, particularly with the additional infrastructure in place.

3. Vodafone had a doubtful past with its previous merger in 2009, with Hutchison’s ‘3 mobile’ resulting in a catastrophic loss of over a million customers. The issue then was that the network simply could not cope with the additional users – hopefully we don’t experience a repeat of the past, particularly considering VHA’s recent $3bn injection into the 4G mobile network.

What does this mean if you’re a TPG customer?

1. During this switch of network, you have two options: you can choose to stay with TPG, or you can opt out and move to a competitor. However, TPG will offer a trial period: A free of charge ‘welcome pack’ where you try the new network for a period.

2. If you decide to remain with the company under the Vodafone network, and were a customer when TPG was relying on Optus, you will actually need to replace the physical SIM card to allow connection to the new network.

3. Expect more competitive offerings from all of the telcos as the market begins to heat up in these particular times.

Ultimately, TPG could have its sights on merging with VHA in the longer term, and this current partnership is definitely setting TPG on the right path to do so.The TPG model is simple: own as much fibre and infrastructure as possible. TPG is quickly closing the gap between rivals Telstra and Optus – watch out. TPG is clearly on a quest to become a full services telecommunications company.

Let us know your thoughts on this partnership by tagging us #lawpath or @lawpath.

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