In a bid to fortify its position in the Australian regional mobile market, TPG Telecom has inked a monumental 11-year network sharing deal with Optus. Valued at a hefty A$1.59 billion ($1.04 billion), the agreement is set to significantly expand TPG’s geographic coverage, doubling it to 1 million square kilometers and enabling access to 98.4% of the population.
Under the terms of the Multi-Operator Core Network (MOCN) deal, Optus will grant TPG access to its regional Radio Access Network (RAN) infrastructure. This move will substantially increase the number of sites in TPG’s network footprint from 755 to 2,444, with Optus committing to accelerate its 5G rollout across regional Australia. By 2028, 1,500 of these sites are slated for upgrade, with the full complement expected to be operational by 2030.
In a reciprocal gesture, Optus will license some of TPG’s spectrum to enhance the capacity of the shared network. Expected to be operational from early 2025, the MOCN will grant TPG Telecom’s retail operations and wholesale customers equivalent access to Optus’ 4G and 5G regional network.
Financially, the deal represents a boon for Optus. TPG will pay a total of A$1.59 billion over the partnership period, inclusive of a fixed fee and contributions to the 5G upgrade program. However, Optus stands to gain A$1.17 billion after offsetting payments for spectrum licensing.
Despite the financial windfall, Singtel, Optus’s parent company, anticipates non-cash impairment charges totaling S$3.1 billion ($2.3 billion) for fiscal 2024, primarily due to a S$2 billion impairment on Optus’s goodwill. This impairment, influenced by the network sharing agreement, is expected to result in a net loss for the second half of fiscal 2024 and lower overall profits for the year.
The deal awaits regulatory approval from the Australian Competition and Consumer Commission (ACCC), with expectations high given the absence of concerns regarding market dominance. However, Optus’s financial woes persist, with recent talks of potential stake sales failing to materialize, leaving the operator and its shareholders to grapple with the impending financial impact.
