The TPG Telecom Ltd (ASX: TPG) share price sank over 5% following the decision by the Australian Competition Tribunal to block the regional agreement with Telstra Group Ltd (ASX: TLS).
Regional deal agreement blocked
TPG was trying to get an agreement through with Telstra to allow TPG to use around 3,700 additional regional mobile sites, increasing TPG’s regional mobile network sites by around five times, and its mobile network coverage from about 96% to 98.8% of the Australian population.
The Australian Competition Tribunal (ACT) declined to authorise the network sharing arrangement following the appeal about the ACCC decision.
TPG Telecom’s mobile network currently reaches around 96% of the Australian population with around 750 sites operating in regional areas. The ACT thinks an approved agreement “would not materially affect TPG’s competitive position in the mobile telecommunications market.”
However, for Telstra, the ACT said it would provide “substantial commercial and competitive benefits and would further increase Telstra’s position of market strength in mobile telecommunications markets at both the retail and wholesale levels.”
The ACT suggested that Telstra would benefit from the additional spectrum gained and would increase its competitive position compared to Optus, which could then ultimately increase the gap between the Telstra and Optus networks if it leads to Optus investing less.
TPG’s response
The CEO of the business said that it would continue to explore options to “deliver great mobile service and value” for customers. It will consider its options for further appeal including a judicial review in the Federal Court. A surprise win could be a boost for the TPG share price in the future.
It also said that it will not give up on regional Australia.
FY23 earnings guidance
TPG said its earnings guidance for EBITDA (EBITDA explained) is still expected to be between $1.85 billion and $1.95 billion for FY23, despite the one-off transaction costs of approximately $20 million to $25 million now being included in the EBITDA range.
TPG’s CEO said that this guidance demonstrated its resilient service revenue performance and strong operating cost discipline. The company said it may need to adjust its future capital expenditure plans if the network sharing agreement does not ultimately proceed.
I think the TPG share price has fallen heavily since July 2020, it’s down around 40%. TPG may have a few positives, such as rising dividends, but there are other ASX shares that could deliver more growth at a better price, in my opinion. So, I’d be fine waiting for a better price before considering investing.
