TPG Abandons Build Of Its Mobile Network Following Huawei 5G Ban

In a statement published by the Australian Stock Exchange (ASX) this morning, the publicly listed company told investors it has abandoned the rollout following the Australian government’s ban on companies using Chinese equipment to build 5G networks.

The move comes after it has already spent more than a billion dollars on acquiring spectrum licenses and infrastructure costs.

TPG, which provides fixed-line broadband services, announced in early 2017 that it would build its own network of mobile towers to compete with the likes of Telstra and Optus.

TPG has since sought to join forces with Vodafone Australia in a merger that is currently under review by the country’s competition and consumer watchdog.

The main equipment vendor for TPG’s mobile network is Chinese telecom giant Huawei, which is the principal target of Australia’s ban.

According to TPG, the reason for using Huawei equipment to build out its network was because it allowed a straightforward upgrade path to 5G, using more Huawei equipment. But since the government announced the prohibition of Huawei equipment in 5G networks in August, that upgrade path is now blocked.

Other Western governments have taken similar positions against Huawei’s telecom equipment vendor, citing fears of espionage by the Chinese government.

TPG said it had continued to build out its network with the equipment already purchased but had reached the decision not to spend any more money on the network given its uncertain future and the likelihood it would not be commercially viable to upgrade to 5G.

“The company has been exploring if there are any solutions available to address the problem created by the Huawei ban but has reached the conclusion that it does not make commercial sense to invest further shareholder funds (beyond that which is already committed) in a network that cannot be upgraded to 5G,” TPG said in a statement.

To date, the company has spent $100 million on its mobile rollout and committed a further $30 million. In 2017 TPG also paid $1.26 billion for mobile spectrum.

TPG’s reclusive CEO David Teoh said it is “extremely disappointing that the clear strategy the company had to become a mobile network operator at the forefront of 5G has been undone by factors outside of TPG’s control”.

“Over the past two years a huge amount of time and resource has been invested in creating and delivering on a strategy that would have positioned TPG very favorably to exploit the opportunities that the advent of 5G will present,” he said.

“While TPG remains committed to the planned merger with Vodafone Hutchison Australia, the Company must continue to make independent business decisions in the best interests of TPG shareholders pending the outcome of the merger process.”

The surprise announcement could impact the ACCC’s decision to greenlight the proposed merger between TPG and Vodafone after it flagged concerns late last year.

Between them, the two telcos spent USD 263 million on the 5G spectrum at auction last month.

Higher prices for Australia

Huawei Australia called TPG’s announcement “extremely disappointing for Australian consumers and businesses”.

Huawei Australia’s Director of Corporate Affairs, Jeremy Mitchell, said the move highlighted the fact that consumers will miss out on cheaper and more affordable mobile services.

“As predicted the Australian government’s 5G ban on Huawei will lead to reduced competition and higher prices for Australia consumers and businesses,” he said via the company’s official Twitter account.

“It is not just higher prices, Australians will miss out on the competition that drives technology innovation (and) miss out on the world leading telecommunications innovation that other nations will be deploying.”―The Mercury