Some analysts are surprised that TPG bid for spectrum. iTWire is not – we forecast it last month. When TPG’s CEO David Teoh, was asked before the auction whether TPG would bid, he said he could not confirm or deny the rumours. What does that tell you?
TPG announced strong financial results recently, posting a half year profit of $78 million. It has now used some of the money to buy some spectrum. Analysts have mixed views on that acquisition.
“TPG is already Australia’s largest MVNO (mobile virtual network operator),” said Ovum’s Nicole McCormick. “While potential plans to become Australia’s fourth MNO would be ambitious, we do not view this as unrealistic. TPG has demonstrated expertise in running a lean business model and it has the platforms (e.g. billing) in place to support an extended mobile business – something which defunct One.Tel did not have.”
RBS Morgans’ analyst Nick Harris was not so upbeat. He was quoted by the Australian Financial Review as saying that TPG was being intentionally vague on potential uses for the spectrum, but that it would be unable to use it for a full-scale mobile network, which he estimated would cost at least $1 billion to establish.
There is no doubt TPG wants to be a major mobile player. Owning its own bandwidth will move it in that direction. It is important to remember it also has a close contractual relationship with Vodafone Australia, laying backhaul fibre for the troubled carrier. If Vodafone were to falter, as is entirely possible, and TPG continues to grow and acquire its own bandwidth, look for TPG as a possible suitor.
It is quite possible Vodafone will be broken up into its constituent global parts if it sells its half share in Verizon Wireless in the US to Verizon, which very much wants it. Vodafone’s ownership of this major mobile carrier is worth much more than its actual operations. Many of these are joint ventures, such as Vodafone Hutchison Australia, which is one of the worst performing operations worldwide.
Verizon has often said that it is interested in buying out Vodafone’s share in Verizon Wireless. The problem has been that Verizon has not been able to find the resources to do so, because Vodafone would want much more than its stake is really worth.
Analysts estimate that Vodafone’s stake in Verizon Wireless constitutes as much as 90% of Vodafone’s entire market capitalisation. It would cost Verizon over $100 billion to buy, which would be the largest such transaction in the history of business.
But what if Vodafone wanted to exit the Australian market, for whatever reason? Who would buy it? Hutchison? Verizon? TPG? Some combination of them all?
As we all know, it’s a funny old world. Nothing surprises any more.