The Telstra Corporation Ltd (ASX: TLS) share price and TPG Telecom Ltd (ASX: TPG) share price are both down after the ACCC response.
For a bit of background, Telstra and TPG are wanting to work together so that TPG can access Telstra’s regional network, while Telstra will get access to even more spectrum via TPG.
ACCC’s response to Telstra-TPG deal
The ACCC said that it’s calling for further submissions and looks forward to hearing from stakeholders about preliminary views. It wants to hear further views from the industry and consumers about how these agreements may impact competition and whether there are public benefits.
Telstra and TPG are asking the ACCC to provide authorisation for the ‘deemed acquisition’ of some TPG spectrum, which is tied to three interrelated network agreements that are being considered together.
Telstra would obtain much of TPG’s mobile spectrum in a range of outer-suburban and regional areas, where about 17% of Aussies live. Telstra would also get access 169 of TPG’s mobile sites in that area.
TPG would then shut down its remaining 556 mobile sites in those areas and acquire mobile network services from Telstra for mobile coverage.
What’s the issue?
The reason why the ACCC is paying such close attention to this was explained by the ACCC Commissioner Liza Carver, who said:
Mobile companies compete in terms of the infrastructure and spectrum they have, as the infrastructure and spectrum impacts on coverage and speed which are important to customers. We are assessing how the proposed infrastructure and spectrum arrangements between TPG and Telstra will change the incentives and ability of Telstra, TPG, Optus, and other market participants to compete and to invest in mobile service infrastructure.
There is still a lot of work to do on this complicated and nuanced review, which is of critical importance to competition in the mobile telecommunication sector. At this stage we have not reached any overall conclusions, but welcome further submissions from stakeholders and consumers alike on the issues raised.
When will investors learn of the decision?
The ACCC said it can only grant authorisation if it is satisfied in all the circumstances that either there is not a likely substantial lessening of competition, or that there is likely to be public benefits that outweigh any public detriments.
The final decision will likely be announced in “early December”.
Final thoughts on the TPG and Telstra share price
If this deal were to go ahead, I think it would be good for both of telcos. Telstra would be able to strengthen its network further, while boosting the revenue and returns of its infrastructure.
For TPG, it would mean it can offer customers a better experience nationally, so it may be able to attract more customers.
I think the Telstra share price is worth considering for the longer-term – its revenue and profit growth looks positive. However, I’m not sure about TPG’s growth outlook. So, Telstra would be my pick of the two.
