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TPG to create Australia-wide mobile network

Pays AU$1.26bn for right to push waves into atmosphere for 12 years

Australian junior telco TPG has announced it will create Australia's fourth mobile network.

TPG and Vodafone were today announced as having placed the winning bids in Australia's latest spectrum auction.

Telco TPG acquired the sole 2 x 10 MHz lot on offer, for for $1.26 billion. Vodafone Hutchinson Australia (VHA) will write a $285.9m cheque for 2 x 5 MHz lot.

The licences will kick off on 1 April 2018 and expire on 31 December 2029. Not long after communications minister Mitch Fifield announced the results of the spectrum auction, TPG went into a trading halt and revealed a presentation (PDF) detailing its plan to “build a mobile network in Australia using current advanced technology for ~1.9bn.” The company aims to “achieve 80 per cent population coverage starting in 2018” when trials will take place. The company says it will take two or three years to build the full network The spectrum fee mentioned above is the major part of the $1.9bn build cost, with the remaining $600m to be spent building the network.

Aiming for 80 per cent population coverage and costs of $600m suggests the company will target Australia's major cities and denser coastal regions, but not smaller towns.

Which is sensible because that's where the customers are, but also disappointing because Fifield's announcement of the spectrum sale says “The highly valuable 700 MHz spectrum band supports mobile broadband services across Australia.”

Few national markets support four profitable mobile carriers and Australia's previously proven too small to sustain a quadrella of carriers as shown by the merger of Vodafone and 3 to create VHA. TPG thinks it can thrive because its extensive ISP operations mean it already has all the customer service infrastructure needed to get into the business. It also feels that constructing a new network that offers only 4G services will mean it doesn't have the costs of a legacy network dragging it down.

If the company stays true to form its mobile services will be keenly-priced, which will be welcomed by consumers. We'll soon know if investors like that strategy, too, as TPG is seeking $400m of capital to realise its plans. ®

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