TPG intends to be Australia’s fourth mobile network operator. After winning the government bid for its own spectrum and spending $1.26 billion, TPG obtained a share and will soon be building its own mobile network with a cost to spend $600 million over three years to cover 80% population. Bringing new competition to any mobile market has a lot of challenges to be considered.
The challenges of building a mobile network, mostly from scratch, are stacked high. While TPG already owns a lot of fibre in the ground which will connect many of its proposed 2500 base stations, the rollout also needs to build enough towers or share existing sites to have coverage for its users. The build is starting in Canberra and most likely spread to other metro areas then expand to rural areas, all while converting subscribers over from the existing networks to bring in some cash flow. Granted there will be existing TPG data customers interested in taking on a package which includes mobile, so this may be an attractive offering.
Obviously there is a combination of financing via a mix of debt, operating cash profits, and a $400 million capital raising priced at $5.25 a share, but how much pressure there must be on David Teoh for this to all come together!
Convincing Australians to subscribe to its network is also another challenge. People already have the choice of three quality mobile operators Telstra, Vodafone, Optus, who are all very competitive and invest a lot into customer retention, and are all focused on expanding their networks and upgrading a variety technologies such as 5g and Wifi, in-building coverage, small cells etc. Apparently TPG intend to be offering 4G connectivity while others are working on 5G and other more advanced technologies! Wi-Fi connection offered by Telstra is already up to 90,000 locations.
TPG has never done anything like this before. While having some components such as call centre operations and billing platforms which are transferable to a mobile operations is a start, the mobile operator space is a vastly different environment to internet service providers. Building the right team to drive the project is crucial. It requires time to gather resources to make an effective team, and selecting people with deep experience, not only for obvious project phases such as site acquisition and construction, but also for the fundamental overall strategy planning of mobile network start-ups. Altering the company from an internet service provider to a mobile service provider is quite a different business model – that will require mass organizational change.
Similar to TPG’s mission to create a new mobile operation, there also other telecommunications company like Qatari group Ooredoo in Myanmar, who in 2013 won a license granted by the Myanmar Government to build a greenfield mobile network. Ooredoo undertook a huge task of building a mobile network from scratch, while at the same time competing with Telenor who also won a license to build. Although Myanmar is a very unique environment to build and operate compared to Australia, many lessons can be learned here by TPG.
There’s no doubt building a mobile network is full of challenges and we’ve seen numerous cock ups over the years in Australia. We’ve had traumatic experiences with Onetel which collapsed in May 2001 and was the fourth largest telecommunications company in Australia. Vodafone was dubbed “Vodafail” and we will never forget Vodafone’s transmission and coverage issues to which there were 12,000 complaints recorded according to reports. And what about large rollouts like Telstra 3G back in 2006 which caused headaches, heart attacks and nightmares to many who worked on the project. TPG must take note of this.
The skill shortage in the telecommunications industry is factor that must be considered. Already stretched in many specialist areas required for TPGs rollout, a few roles that come to mind are strategy, network operations, site acquisition, installation and commissioning technicians. Many wireless skilled engineers who migrated to Australia for mobile projects ended up working on the NBN fixed network projects, transferring their skills across and getting paid much less. It will be interesting to see how this project disrupts the telecommunications industry from skills and recruitment perspective. Once TPG starts to rollout, the demand for skilled workers will swell.
And which vendor will TPG use out of the big three (e.g. Huawei, Nokia, or Ericsson)? Sorry ZTE you didn’t make the cut but I’m wishing you good luck to finally get a shot here! Would TPG go with the same vendor (Huawei) as Vodafone, since if they were to merge as some have suggested, this would make it more feasible? And will the winning vendor then subbie out the design and construction, implementation? Will it be the usual mums and dad rates for the little subcontractor who ends up building it?
TPG must be busy behind the scenes getting prepared for the coming rollout! Let the games begin.