Telstra (ASX:TLS) and TPG Telecom (ASX:TPG) will not be able to share infrastructure across regional Australia, as the competition tribunal upheld the decision to block the deal.
The Australian Competition Tribunal (ACT) serves as the final arbiter for competition issues in the country, often used by companies whose deals have been blocked by the Australian Competition and Consumer Commission (ACCC).
The decision is a victory for regional consumers and the ACCC, which argued that the $1.8 billion agreement would solidify Telstra’s dominance and harm mobile services.
Following the announcement by the Commission, Telstra shares slightly increased, while TPG shares fell by 11% at one point. On Wednesday afternoon, they were trading down 6%.
Under the proposed arrangement, TPG would decommission or transfer its mobile sites in regional and urban fringe areas to Telstra. In turn, TPG would acquire mobile network services from Telstra, granting the latter access to most of TPG’s regional spectrum.
The multi-operator core network (MOCN) agreement would have allowed TPG to utilize approximately 3,700 additional regional mobile sites, multiplying its regional network coverage by about five times and extending its mobile network coverage from approximately 96% to 98.8% of the Australian population.
The ACCC rejected the plan in December, arguing that it posed a “real risk” of reduced investment in critical infrastructure by TPG and Optus.
The Competition Tribunal agreed with this perspective and declined to overturn the Commission’s decision.
“We thoroughly examined the proposed arrangements. While some benefits exist, we believe that these arrangements will likely result in reduced competition in the long run and leave Australian mobile users worse off over time in terms of price and regional coverage,” stated ACCC Commissioner Liza Carver on Wednesday.
“Mobile networks are crucial to many aspects of our lives, including livelihood, well-being, and the ability to stay connected with friends and family. Any reduction in competition will have far-reaching impacts on customers, including higher prices and diminished quality and coverage,” added Ms. Carver.
“Mobile network operators compete not only on price and package inclusions but also on coverage, speed, and other quality aspects influenced by the nature and extent of their underlying network infrastructure,” she emphasized.
“Entering into the proposed arrangements by Telstra and TPG would bring about a significant change to the market structure with long-term consequences,” concluded Ms. Carver.
In response, TPG Telecom’s Chief Executive, Iñaki Berroeta, stated that the determination “entrenches the status quo for mobile coverage in regional Australia.” He reassured their commitment to expanding the reach and capabilities of their mobile network in regional Australia, exploring options to provide excellent mobile service and value to their customers.
Optus, controlled by Singapore, supports the decision, as it opposed the deal, believing it would strengthen Telstra’s market dominance.