TPG Telecom and Vodafone Australia confirm merger talks

vodafone TPG
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Australian broadband operator TPG Telecom has confirmed it is in talks with Vodafone Hutchison Australia for a potential merger deal that would keep the mobile market to three players.

TPG bought A$1.3 billion worth of spectrum in April 2017 in a bid to become Australia’s fourth mobile operator, although it already operates a mobile service as an MVNO using Vodafone’s network. TPG Telecom is scheduled to launch its mobile network later this year.

A TPG/Vodafone deal would save TPG a bundle on capex, preserve Australia’s mobile triumvirate – much to the relief of Telstra and Optus – and give third-ranked Vodafone a boost, telecoms analyst Paul Budde told Reuters.

As for the network Vodafone would inherit, TPG is reportedly building few macro sites, instead opting for small cells that leverage cloud-RAN technology and TPG’s fiber infrastructure. The idea is to install lots of small cells and use TPG fiber to backhaul them to a centralized point where all the processing is done, TPG chief operating officer Craig Levy explained recently to Australian Financial Review:

“This will effectively mean a smaller footprint on poles. We’ve catered to a 5G upgraded path where we can make changes to the radio, but the actual real estate on the pole, and most importantly the backhaul and the centralised intelligence, we’re taking steps today for the future.”

In other words, TPG’s buildout has been designed with 5G firmly in mind, as small cells will be key to 5G rollouts using mmWave bands in dense urban high-traffic areas. A merger deal could give Vodafone a head start on 5G small-cell deployments.

That said, it’s all just talk for now – according to Reuters, TPG and Vodafone Australia have issued statements confirming they’re engaged in “exploratory” talks, but have offered no further details on what kind of deal they have in mind, be it a merger, partnership, JV or something else:

“There is no certainty that any transaction will eventuate or what the terms of a transaction would be,” TPG said, while Vodafone called the talks “non-binding”.

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