Turnbull sends TPG share price into tailspin



news A statement made yesterday by Communications Minister Malcolm Turnbull which appeared to have undercut the stability of Australia’s telecommunications regulatory environment has had a dramatic impact on the share price of national broadband provider TPG, with the company’s stock taking a steep dive yesterday.

In September last year, national broadband company TPG flagged plans to deploy so-called fibre to the basement infrastructure to some 500,000 apartments in major Australian capital cities, in a move which will compete directly with the new Coalition Government’s plans to conduct similar rollouts under the Coalition’s Broadband Network (CBN) scheme. The move was shortly followed by a similar announcement by Optus, which is examining its own fibre infrastructure to determine whether it may conduct a similar FTTB rollout to TPG.

However, in comments made to the Financial Review yesterday morning (we recommend you click here for the full article), Communications Minister Malcolm Turnbull appeared to have called the legality of both rollouts into question. “It’s yet to be seen how much scope they’ve got for that,” the Minister reportedly said, adding that the issue would be examined by the Panel of Experts conducting a cost/benefit analysis of broadband and associated regulation.

The comments throw both potential rollouts — likely representing investments worth at the least, tens of millions of dollars — into jeopardy, as they open the door for new legislation to stop the rollouts from going ahead, even if they are already partway through. The Coalition’s initial broadband policy stated that the cost/benefit study was due to be delivered within six months, meaning that it is not likely to be finalised before mid-2014, given that the Panel of Experts was appointed in mid-December.

Turnbull’s comments appeared to have a substantial impact on TPG’s share price. After TPG announced the planned network investment in September last year, the company’s share price jumped substantially, from around the $3.50 mark to sit around $4.40. In December it jumped substantially again, and was trading as high as $5.68 in mid-January.

At the start of trading yesterday, TPG’s share price was $5.35. By this morning, it had sunk to $5.01, a drop of 6.8 percent. Part of the drop could be attributable to wider falls in the sharemarket yesterday, but other telcos such as Telstra and iiNet were not affected to the same extent, signalling that TPG’s share price fall was more closely linked to Turnbull’s comments rather than to the wider index fall.

Turnbull’s comments come despite the fact that the Minister Malcolm Turnbull has repeatedly stated that he is in favour of infrastructure-based competition in Australia’s broadband environment — even in competition with the Coalition’s Broadband Network. Both network rollouts would be likely to provide infrastructure-based competition with the Coalition’s Broadband Network when it was eventually constructed, and hence undercut the finances of NBN Co in some regions.

“Infrastructure-based competition is the norm around the world because it drives investment, encourages innovation and keeps prices lower,” a frequently asked questions document about the Coalition’s broadband policy states.

It appears that this situation with regulatory uncertainty caused by Australia’s political sphere has happened previously with regards to Australia’s telecommunications industry. Internode founder Simon Hackett, for example, had publicly stated in September 2011 that if the Coalition won the 2013 Federal Election and cancelled Labor’s FTTP-based National Broadband Network project, then Internode could have listed on the Australian Stock Exchange and deployed its own fibre infrastructure further, in a similar vein as TPG and Optus are proposing.

However, the ongoing uncertainty about how Labor’s National Broadband Network project and the Coalition’s evolution of that project, dubbed the Coalition’s Broadband Network, would be deployed appears to have held back those and potential plans by other telcos to invest in infrastructure in Australia.

In September last year, after the Coalition won the Federal Election, Tony Abbott declared Australia “open for business”, pledging to create a competent, trustworthy Government with “no surprises”. Well, I think it’s safe to say that that promise has been blown out of the water.

What we’re seeing here is very clear. The fundamental function of governments is to ensure internal and external security, while providing stable underpinnings for the economy and the national legal framework. In making these comments yesterday, Minister Turnbull has severely undercut the stability of Australia’s telecommunications regulatory environment, leaving an ill-defined time period that has frozen important investment decisions worth tens, perhaps hundreds of millions of dollars; decisions that would result in better broadband, built by the private sector, for hundreds of thousands of Australians.

And the stockmarket has reacted predictably, cutting a premium off TPG’s share price due to the reduced growth prospects which Minister Turnbull has enforced on the telco.

This is precisely the opposite of what a Crown Minister should be doing. Ministers should be concerned with setting long-term, stable regulatory frameworks. Yet Minister Turnbull seems unaware that his flippant comments can quickly cause real financial damage to companies, investors and a delay in better services to consumers.

It’s pretty clear that Labor failed to deliver its NBN policy in a timely manner; Labor has its own degree of incompetence and poor management to account for. However, at least since April 2009 the telco market has largely known what to expect from the Government, even if it didn’t end up delivering it. With the Coalition, things seem to be changing every day in unpredictable ways. And that’s not a recipe for economic growth or better services.

Furthermore, we are now in the ludicrous situation where a Coalition Government — the side of politics that is supposed to be staunchly pro-private sector — is actively blocking tens, perhaps hundreds of millions of dollars of investment in the telecommunications sector. That’s not a good look for Turnbull and his colleagues.

Image credit: Screenshot of CommSec


  1. speechless…..

    I am wondering if in fact, Malcolm is actually a double-agent? If not sabotaging the Internet infrastructure in Australia what else could he be possibly be doing? It appears he is consciously and deliberately denying Australians access to broadband? At this point in time it would be faster to terminate the NBN-Co totally right now, and let private enterprise resume operating as they were, unbelievable…..

    PS: Renai – Possibly you weren’t pessimistic enough in your “2014 will be the NBN’s first and last great year” article

    • “Australia – open for business for the chaps we approve of.”

      There, fixed it for you.

      • Australia – open for business, but only for the chaps we approve of and thats only if Murdoch says its ok.**

        Fixed it once more for you.

  2. It’s definitely looking more and more as if MT is working directly for Rupert Murdoch:

    1. Scale back the FttP build
    2. Use existing HFC infrastructure for CBN
    3. Discourage investment in fibre infrastructure by private enterprise

    Where does this leave Australia’s broadband future?

    Sigh. Politics. Is it getting worse or am I just noticing it more?

  3. “Hey I hear that France tele isn’t rolling out FTTP anymore and is rolling out string cans..”
    *watches MTs shares plumit*

  4. The NBN satellite service is as slow as the copper wire network ,it is supposed to be 10 times faster .

    • If you are talking about your service Nevile, that’s interesting as many have said it is considerably better than even their old satellite plans.

      Do remember NBNCo. will be launching their own satellites early next year for higher speeds and better contention.

    • Sorry, but what? Are you using it? What evidence do you have it is slower?

      Copper services in satellite targeted areas are pretty much dial-up only, as in 56/33kb services. Anyone on satellite that can get ADSL > 1.5/0.15Mb should not really be using it, even if it can offer 6Mb downstream, which is faster than the average ADSL connection. Besides that it is supposed to deliver a 12/1Mb once the permanent satellites are launched in 2015. The interim service is utilizing spare Ku-band on Optus C1 and/or D3 from memory (the satellite delivering Austar/Foxtel TV), so there isn’t a lot of spare or inexpensive capacity right now.

  5. Good pickup Renai, and nice summary opinion on the bottom there. You are absolutely right that the Government can’t be seen to be protecting its own (however maligned) investment by using its legislative authority to block some private enterprise while protecting others (ie block TPG FTTB while protecting Telstra/Optus HFC). Interestingly, the NBN anti-cherry picking laws would have been acceptable to liberal views only because the original NBN was to be wholesale and at arms length to any retail services.

    Protectionism is so alien to liberals its amazing the LNP could be even considering them, although I did read a piece you wrote ages ago about how Turnbull was appearing to be making completely unnatural statement in order to attach the (then) Labor Government, and thus doing so purely for political point scoring.

    Further evidence that the whole thing has become so politicised it is beyond scientific analysis in any field beyond psychology

    Keep up the good work.

  6. Just like to point out that MT is the communications minister and not the CBN minister.

    TPG share prices going down on behalf of MT’s comments is a BIG deal!

  7. “In September last year, after the Coalition won the Federal Election, Tony Abbott declared Australia “open for business”, pledging to create a competent, trustworthy Government with “no surprises”.”

    He didn’t lie, he just forgot to mention that it would only be LNP approved companies that would actually benefit from that “open for business” policy…

  8. I wish the government would now step aside and let the capitalist system work out what to build, where and when.

    Market forces will never be understood by the government. Whilst a socialist philosophy on “nation building” infrastructure is a seemingly noble and altruistic attitude, it is clearly beyond the capabilities of any government to build such infrastructure – certainly not within the timeframe of a political agenda where government and thus philosophy change within governance terms simply introduces uncertainty and hinders actual progress.

    If TPG, Optus or anyone else wants to invest in capital expenditure to deliver services they think will provide a return in investment – THEN LET THEM. I don’t care if this means the NBN Co. and thus the government apparently lose out on market share – they’re going to get taxation revenue – regardless – from not only the service charges, but the wages, services and materials required to build and maintain such services – no matter who builds it.

    Stop obstructing progress. Get out the way, and let the market forces decide what is worth building – where and when.

    If the socialists are concerned about making a disadvantaged minority (those outside areas deemed worthy of capital investment by private enterprise), then by all means let the NBN Co. build THAT infrastructure.

    We’ve already – ALREADY – paid enough to have many, if not all the regional areas considered non-viable for private enterprise investment in infrastructure to have been covered by an NBN Co. build.

    I also find it perplexing that as taxpayers we were expected to accept that a infrastructure built by NBN Co. would have the SAME ongoing monthly access charges that private enterprise would be charging, despite for paying for the infrastructure UP FRONT. If we paid for the building of the network under NBN Co. then what kind of price gouging is going on to make us pay a monthly access fee equivalent to having recoup the build costs AGAIN ?

    • You should read a history book if you think socialist nation building never worked. I recommend Paul Kelly’s “The End Of Certainty”. Without socialist nation building there wouldn’t be an Australia.

    • Wow Mike.

      Such blind faith in ideology, even after having witnessed the complete shambles which was our comms system sans NBN… which made the NBN imperative…?

      :/ amazing

    • Mike, is it that you just don’t understand that market forces are ONLY interested in profitable areas? Any issues with that? So the next question, how do you provide similar services to “unprofitable” areas? Your contention is either a) they don’t get it, or b) the Government builds it, runs it, uses tax revenue to provide the service. I’m guessing that b isn’t your preferred option either…So then anywhere outside of medium density urban gets poor mobile BB on the phone spectrum at huge cost…or with b, everyone pays more tax, maybe they could tax the providers of the cherry picked services similar to USO…then again why not build an entity that uses a cross subsidisation method to build it, then let all access seekers have access to all customers at an equitable price…

      • The current government does not want to prop up SPC, Holden or other unprofitable institutions, so why should we all prop up an unprofitable country town?
        Not saying it’s right, just sayin’.
        The only reason they are getting anything is because there’s votes in it.

        • My understanding of it is the SPC deal is actually different to the motor industry deals, in that the SPC deal is a one-off partnership investment, while the Holden/Ford/Toyota payments were on going “life support”. Coke themselves are actually putting in $161m…

    • The “capitalist system” has failed in Australian telecoms for decades, so your actually arse about on that, it’s time for the government to correct the market failure…

      And if you think social democracies don’t work, please explain the strength of the German economy (or any of the northern Euro countries!).

    • I agree but I think we need to be realistic when it comes to service unprofitable areas.

      People who live out side a major population center need to realize they can’t expect there services to be cross subsidised by the rest of the population.

      If you live in a remote area there are consequences some of them good some of them bad.

      • Well Tom perhaps you and your city mates would like to return all the food, ores and other produce we unprofitable country folk supply to you people, Lets see you get out of bed and go milk the cow, collect the eggs, pick the fruit, harvest the crops, We live in remote areas and supply the stuff you lot take for granted, Further why don’t you get onto your urban council and ask if you can keep the animals so you can do that.
        Without remote areas and their supporting towns you would have nothing or spend some of your hard earned down time working like the rest of us unprofitable areas. there should be more put back into those so called unprofitable country towns.

        • +1 Nicki,

          It amazes me how quick some are to forget about what regional areas do for the country. If they saw the industry, agriculture and mining activities outside cities they would realise the importance of the rest of Australia.

        • @Niki, I thank the gods that there are weird people that WANT to be farmers.
          It sure isn’t a way to the “good life”.

          BUT the great central point of the telecoms distribution argument is PRIVATE ENTERPRISE (PROFIT) Versus SOCIALISM (REDISTRIBUTION).

          At the end of the day, the critical point becomes one of NEED vs WANT.
          Virtually nobody – city or country – needs the phenomenally expensive super Net speeds.
          Anybody who does really need them (like Online Game players, 24×7 Twits) should simply pay for them.

          The constantly used pitch of the Doctor doing emergency surgery over the Net, etc is a furphy.

          AS for making us “more competitive internationally” that could be fixed by the Government doing the old “keep ’em honest ” trick as when the Government went into competition with the voracious private Banks via the Govt. Commonwealth Bank. Didn’t last long before “vested interests” made it go private….

          Our biggest problem in communications competition is that the Chinese own the overseas pipeline. Private Enterprise at its best!
          Australia has the worst, slowest, most expensive international Internet service in the world.
          (Literally. It used to be Mongolia, but they went Satellite or something and we took over the bottom slot.)

  9. Umm, lemme get this straight…

    MT actually raises questions about the legality of competing infrastructure builds because ALP legislation made it illegal to compete with the NBN (and TPG is ignoring the spirit of that legislation if adhering to the letter), and he’s the only bad guy?


    and this from the AFR article linked in Renai’s article..

    “While the NBN is protected from rival networks by anti-cherry picking legislation, TPG plans to sidestep this by using a loophole that allows extensions of less than a kilometre for networks built before 2010.

    But Mr Turnbull said the legality of TPG’s plan remained up in the air.

    “TPG would have to do that within the limitations of the law,” he said. “There are some grandfathering provisions and we haven’t got any plans to change those.

    “It’s yet to be seen how much scope they’ve got for that.””

    Seems pretty clear he’s hedging his bet’s to see if they will squeeze through the loophole or get stuck. But he doesn’t intend to shut it down.

    MT would certainly be a hypocrite for deliberately using the ALP’s protectionist policy to shepherd the LNP’s alternate network, but no more so than some of the posters here who still support the ALP’s plan and the government that came up with the anti-competitive legislation in the first place…

    If this had occurred under the ALP, the same posters would be crying foul on TPG and pushing for Conroy to close the loophole.

    And even better, the negative response to Mike’s “let the market invest” is priceless, since he’s basically telling Turnbull off for not sticking to his free market principles.

    You guys are seriously a riot, stay amusing… ; )

    • Our allegiance to the superior FttP may well be amusing to you, but not nearly as amusing as your own obvious political subservience is to us…

      Can Malcolm ever do wrong?

      Rhetorical we know the answer…

      :/ amazing

      • Quote from my post:

        “MT would certainly be a hypocrite for deliberately using the ALP’s protectionist policy to shepherd the LNP’s alternate network”

        Seems that I am actually being critical of MT as well /shock horror. For noting (not that you care/pay attention/will remember the next time you start typing sh#t again), I do not support MT or the LNP, voted independent for the last two elections and am highly critical of both parties… =)

        Now, ya done making a fool of yourself or you want to continue?

    • Well, yes, technically you are correct.

      But this was based on FTTP being rolled out everywhere.

      Now that very little is, I do think that other companies should be allowed to install it where they want.

      I mean if the LNP says, “Here, have a “NBN Coax” connection” and say, TPG said, “Here have a fibre connection”….

    • Apples to oranges (and Mike neither).

      Apples: Labor’s all-fibre network that requires cross-subsidisation. It’s all about the outcomes.

      Oranges: The Coalition’s complete mess of different technologies – the NBN is practically destroyed – let the private sector take over in those areas disadvantaged by the CBN. It’s all about the outcomes.

      Mike: I read a book called “Atlas Shrugged” once.

      • The means are identical, it’s just you support one end and don’t like the other.

        So yeah, the legislation and the ability to block competition is apples to apples. You just want it to be about the end result because it justifies changing position… =)

        TPG already knew they were engaging in something that might collapse on them. That’s why they are ‘exploiting a loophole’ (not the typical language when everything is above board and legit). They can hardly cry foul if they get stuck trying to slip through.

        • Malcolm has hung him self from his own words, he’s the one that wanted competition (pre-election). He’s also the one that now wants to ignore that now they are in power. I’m judging him from his own words, not Labors (now outdated) legislation…

        • My position has always been about the end result – the maximisation of fibre (preferably to 93%), so my position hasn’t changed. Just because you’re conveniently misrepresenting my position doesn’t mean I’ve changed it. You would make a good politician, Asmodai.

          (I’ll note though that your position hasn’t changed once either. Your position has always been… the Liberal party’s position.)

          If we can’t have the best (apples), we’ll take the second-rate approach (oranges). If the Coalition is committed to destroying the NBN (and they are), then they shouldn’t stop others (TPG) from picking up the slack. The NBN is a complete package of legislation, technology, pricing, etc. You either have it, or you don’t. The Coalition doesn’t want it.

          Not everyone here who supports fibre would agree with my pragmatism.

          Really, if I can extend this metaphor: Turnbull wants to sell us a crate full of “oranges”, but only a third of which are good, a third of which are rotten, and a third of which are lemons.

          Mike, on the other hand, you know, his comment was pure ideology, with no basis in reality. Why, do you agree with him?

  10. Um, I think it’s a bit of a stretch to raise claims of a “steep dive”. It look indistinguishable from noise at the moment. You need more time, more data, to see if the fall is sustained. It’s still a hell of a lot higher than it was in December .

  11. TPG’s share price drop had nothing to do with Turnbull’s announcement. The share price change correlates quite closely with the All Ordinaries. TPG’s share price started a recovery the next day along with the rest of the ASX. I suggest you check your facts and issue a retraction.

    • “Part of the drop could be attributable to wider falls in the sharemarket yesterday, but other telcos such as Telstra and iiNet were not affected to the same extent, signalling that TPG’s share price fall was more closely linked to Turnbull’s comments rather than to the wider index fall.”

      • I know you mentioned a few of the figures Renai, but I’ll add more.
        according to the AFR TPG’s stock price fell 5%, while during the same period; the ASX dropped 1.5%

        Thats a 3.5% discrepancy, or approximately 140 million dollars.

  12. I, along with many simple souls that try and do international business via the Internet do not need phenomenal speeds, we really only need to be able to get out to our (necessarily offshore to work) websites and clients to get in.
    14k is all I’ve ever needed (don’t game, don’t hot movie download) which I get inside Oz – even to Perth from Sydney.
    What I get from the international “choked” pipe is an average of 2.5k on busy times and 4k if lucky, inside school-times.

    Many, many times I’ve asked what is the true story here?
    Sometimes I get an odd convoluted answer that it is all Labour’s fault or Liberals fault, but no sane explanation as to why my own offshore Website is timing out on me trying to access it from Oz.

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