TPG Telecom and Optus have agreed to share regional spectrum and mobile network infrastructure for 11 years, after a similar deal between Telstra and TPG was sunk by regulators.
The deal will allow TPG Telecom to serve customers from 2444 towers instead of 755 today, and covers both 4G and 5G services.
The likelihood of TPG and Optus being able to agree to terms was used by the ACCC to scuttle an earlier proposed deal between TPG and Telstra.
Optus – which had opposed a TPG-Telstra arrangement – argued at the time that a deal with TPG could be done.
A year later, it has the proof.
All TPG Telecom brands – Vodafone, TPG, Lebara, iiNet, and felix will benefit from the Optus arrangement.
The initial term is for 11 years, but TPG Telecom has an option to extend for an additional five years after that. Services are proposed to start in “early 2025”.
The deal will require regulatory approval, but that is likely to be a lower hurdle given the ACCC suggested such a deal was commercially feasible.
TPG Telecom said it expects to pay Optus around $1.17 billion in total over the 11 year term.
Within that, there are payments for services and for additional 5G network infrastructure, but they are offset by payments TPG is to receive for valuable spectrum that it has rights to but does not use.
In addition to the new deal, TPG and Optus have an existing “passive equipment sharing joint venture” in metro areas that will continue.
TPG Telecom said it will decommission its current regional network.
It expects to avoid costs of $575 million to $675 million over 11 years that it would have incurred as part of go-to-market activities.
TPG Telecom was buoyant at the growth prospects enabled by agreeing to terms with Optus.
“TPG Telecom expects this significant increase in the size and performance of its mobile network will enable it to accelerate mobile subscriber growth over time as a result of reduced churn and increased addressable market,” it said in a financial filing.
“Relative to upgrading and maintaining TPG Telecom’s regional network, TPG Telecom expects the … arrangement to achieve break-even in cash terms from FY26 onwards.”