Australia Denies Telstra-TPG Wireless Internet Deal, Prompting A Legal Battle

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Australia’s competition regulator has refused to approve the asset exchange between Telstra and TPG, Australia’s top two broadband providers.

The decision was based on concerns about competition in the market, which may lead to a legal struggle over access to four million customers.

In a groundbreaking agreement publicised in February, Telstra Group (TLS.AX) agreed to purchase spectrum and transmission towers from TPG Telecom Ltd (TPG.AX). In return, TPG would continue offering 4G and 5G coverage using the newly acquired infrastructure of Telstra, but financial details still needed to be given out by either party.

In contrast, Optus—the second largest wireless internet provider owned by Singapore Telecommunications (STEL.SI)—voiced their disagreement with the deal as it would only further solidify Telstra’s dominance in the market.

On Wednesday, the Australian Competition and Consumer Commission (ACCC) determined that TPG-Optus’s plan would present “a genuine risk of reduced investment in legitimate infrastructure,” thus rejecting it. Telstra and TPG expressed their displeasure with this verdict since it overlooked the potential benefits for 17% of Australia’s population who were to be impacted by the union. Both companies have announced they will appeal ACCC’s decision.

This ruling sets up a second face-off between TPG and the ACCC within two years. Previously, the ACCC had prevented TPG from taking over CK Hutchison Holdings Ltd’s Vodafone Hutchison Australia. In 2020 the Federal Court overturned this denial and allowed it to occur.

Amid the intense backlash, including from official government organisations, that Optus has been facing since revealing a data breach involving 10 million customer accounts in October of 2020, this marks an encouraging development for the company.

By knocking back this deal, the ACCC has helped ensure that our regional communities will continue to benefit from competition,” said Optus CEO Kelly Bayer Rosmarin.

An unsuccessful appeal to the Australian Competition Tribunal could see a longer-term… impact to our EBITDA forecasts, excluding the impact from potentially incremental investment needed to upgrade regional networks,” UBS analysts wrote in a client note about TPG.

Paul Budde, a well-respected telecommunications analyst, expressed that the decision from the ACCC showed how Australia’s competition regulations are not in line with reality. Instead of considering services offered by organisations, they focus on infrastructure ownership.

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