That ambition was evident yesterday when the company announced that it was dipping its toes — nay, sinking both feet — in the Australian mobile market by purchasing 2x10MHz of mobile spectrum in the 700MHz band.
TPG forked out $1.2 billion for the spectrum and said it would spend a further $600 million to roll out a mobile network over the next three years.
With this, it signalled that it would be a player in the mobile market in years to come, a space which is presumed to be crowded and yet sees many players making enough to put much more than square meals on the table.
And it expects its mobile business to be cash positive by the time it grabs 7% of the entire cake.
TPG has earned whatever market share it has in other niches by creating a reputation as a low-cost carrier, unmindful of the stigma of poor service that has accompanied it.
At the same time, it has acquired other properties like iiNet and PIPE Networks which it has run as independent business units allowing them to continue to cater to the same clientele as they did before being acquired.
The company listed some of the advantages it had already as under:
- Backhaul capacity in Australia through its 21,000km fibre network;
- Thousands of potential sites for deployment of mobile antennas already connected to that fibre network;
- More than two million Australian retail and corporate subscribers to upsell mobile services to;
- Significant owned international capacity connecting customers to the rest of the world;
- Call centres and back-office systems already supporting more than two million retail customers;
- A portfolio of strong brands appealing to a diverse range of demographics; and
- Large-scale infrastructure construction and project management expertise with experience in large mobile network building projects such as the construction of 4000km of dark fibre to Vodafone network towers and the Singapore mobile project.
So should Telstra, Optus and Vodafone, the big three in the Australian mobile space, be afraid now that a fourth entity is bidding to partake of the profits in the mobile space?
Telstra charges the highest prices for mobile services but sells based on claims that it has the widest, and best coverage, of any telco. That is supposed to provide a balance to the appalling service for which it is known.
Telstra's mobile earnings are already under strain: a recent Deutsche Bank report pointed out that while mobile subscriber growth had grown 2% in the second half of 2016, it was Optus that continued to make gains. The second biggest telco added more subscribers than Telstra for the fifth six-month period running.
In the second half of 2016, Telstra added 79,000 net post-paid subscribers and Vodafone 47,000; Optus topped both with 201,000.
But with the bigger telcos having to constantly cut their margins to stay ahead of smaller entrants into the game, overall revenue in the mobile space has been falling for some time.
Service revenue fell 1% in the first six months of 2016 and 3% in the second six-month period. Overall industry EBITDA was down 7% and 8% during those periods.
The fall in mobile termination access rates hit the incumbents. And a decision that forces Telstra to share, with mobile competitors, that part of its regional network that is a monopoly at the moment, would be a further blow.
For mobile users, any competition that is meaningful would be welcome. That TPG is taken seriously by investors is evident from the drop in Telstra's share price overnight. The biggest telco in the country saw its shares fall nearly 8% equating to a loss of nearly $4 billion in its market cap.
TPG already has some of the experience needed to handle mobile users through its iiNet mobile service which resells Optus's mobile service to its Internet subscribers. It is thus not a total stranger to this class of customers.
More companies have crashed and burned in the telco industry in Australia than most other industries. Some have been high-profile — remember Warnie and One-Tel? — while countless smaller players have come and gone and been hardly noticed. TPG, though, has been a player, a quiet but influential one, in every space it has ventured into thus far.
There is always the possibility that the other big players can create some kind of Clayton's competition — as Australia's big four banks have often done — and keep sharing of profits to the minimum. Whether TPG will buy into this remains to be seen.