TPG announces mobile network and Telstra shares drop

Telstra shares have fallen dramatically after the announcement that competitor TPG has acquired the last of Australia’s 700MHZ spectrum. 700MHZ is considered premium for mobile phone networks, as it requires fewer towers to cover a greater distance. The Australian Communications and Media Authority says TPG paid $1.26 billion for 700 MHz spectrum.

This now means that there will be more competition between mobile network providers for the loyalty of customers.

The rollout is expected to cost TPG about $1.9 billion, but rollouts are scheduled to begin over the next three years. Some areas have already been selected for the rollout in 2018.

TPG Chairman David Teoh, who announced the TPG mobile network, is very excited about the change.

“This acquisition of 700MHz spectrum in Australia is a tremendous development for the long-term future of TPG,” says Teoh.

“We are uniquely positioned to leverage our success in the Australian fixed-line broadband market to drive the next phase of growth for TPG’s shareholders and bring new competition to the Australian mobile market.”

TPG are very confident about this decision, with them seeing this opportunity as ‘significant’ due to the amount of Australians who have mobile phones. That number is about 32.6 million phones within Australia and that’s growing by 2.6% per year.

While TPG are confident in the decision to tap into the 32.6 million people strong mobile market (which grows by 2.6% per annum), Telstra’s confidence is suffering.

Today, Telstra was trading at $4.17, which represents a 8% drop in share prices. As you can see from the chart below, this is not exactly good news for Telstra.

This is an especially bad time for Telstra, as they’ve rolled out a network that’s ten times faster than the NBN. Competitors within this monopoly that they’ve had aren’t exactly welcome.