news As speculation increases about a possible merger, Vodafone and TPG this morning announced a $1 billion deal which will see the pair increasingly link their operations together, with TPG to shift its mobile customers to Vodafone’s mobile network and construct an extensive dark fibre network to support its partner’s mobile towers.
The most important immediate implication for customers from the deal is that TPG will immdiately start migrating its mobile customers onto Vodafone’s mobile network. TPG said at its annual results session in September that it had about 320,000 customers using its mobile services, although it is not clear whether that figure also includes customers it acquired with the purchase of iiNet.
It is believed that both TPG and iiNet currently uses Optus’ network for mobile access, meaning the loss of those customers will represent a significant loss of business for the SingTel subsidiary.
In a statement, TPG chief executive David Teoh said his company’s mobile customers could look forward to the “reliability” and “super-fast 4G speeds” of Vodafone’s network “One of the biggest benefits for all existing TPG mobile customers is access to 4G on Vodafone’s network, meaning they will be able to experience substantially faster data speeds” he said.
But in the long-term, customers will also benefit from a separate section of the pair’s deal which will see TPG construct additional fibre directly to Vodafone’s mobile towers to increase the data capacity they can carry.
Under the agreement, TPG will provide Dark Fibre and network services to more than 3,000 Vodafone Australia sites over a 15 year term. In order to provide the services, TPG will extend its current fibre infrastructure by constructing about 4,000km of new fibre to Vodafone cell sites across the country. TPG owns a substantial amount of fibre already through acquisitions such as its buyout of fibre specialist PIPE Networks.
Vodafone chief executive Iñaki Berroeta, said that the transmission agreement was a step change for the Vodafone network and would deliver lower latency, an exponential increase in capacity and enhanced resilience.
“Dark dibre is about preparing Vodafone for the future. It is the next step in our network evolution and builds on our multi-billion dollar network investment in recent years to further enhance the customer experience,” Berroeta said. “For customers, it will mean a higher-performing, 5G-ready network which will enable exciting future opportunities such as virtual and augmented reality applications.”
“Network data traffic will continue to grow through customers’ appetite for mobile content and the emergence of technologies such as the Internet of Things, and a Dark Fibre network will allow us to cater for future growth.”
Teoh said: “This is an exciting opportunity to apply our proven capability in delivering dark fibre services to Vodafone utilising our own fibre infrastructure across the country. The companies are already working extremely well together, and the end result will be a network that will enable Vodafone to continue to deliver a premium service long into the future, without the capacity limitations of legacy technologies.”
This agreement extends the existing relationship between the two companies, with TPG having already delivered 900km of fibre for VHA sites between the 2011 and 2013 financial years.
Construction of the dark fibre network will start immediately with deployment to the majority of the existing Vodafone network to be completed during 2018. TPG estimates that it will incur incremental capital expenditure of $300 million to 400 million over the rollout period, the majority of which will be incurred over the next 3 years.
TPG will provide the dark fibre services for 15 years from the date each site is delivered, with minimum contracted revenue over the term exceeding $900 million.
Berroeta and Teoh said the two agreements built on the existing long-term working relationship between the two companies. “We have the need for dark fibre to set up our network for the future and TPG has the resources to deliver it on our behalf, so it is a natural fit” Berroeta said.