TPG pays $1.2bn for 700 MHz lots

TPG has paid an astonishing $1.26 billion for 2 x 10 MHz slices of 700 MHz spectrum in the ACMA’s final auction of the band.

Another bidder, Vodafone Hutchison, secured 2 x 5 MHz for $286 million.

In an announcement to the Australian Stock Exchange, TPG said it will use the spectrum to build a mobile network in Australia with 80% population coverage.

All up, the network will cost approximately $1.9 billion, comprising the $1.26 billion paid for the spectrum plus $600 million for network rollout capital expenditure over a three-year period.

The company said it will fund the capital expenditure and the spectrum payments over the next three years through a combination of operating cash flows and existing and new debt facilities.

“This acquisition of 700 MHz spectrum in Australia is a tremendous development for the long-term future of TPG,” said TPG’s executive chairman and CEO, David 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.

“We believe that our mobile strategy will be complementary to our ongoing fixed-line business, with the ability to bundle mobile and fixed services expected to have a beneficial effect on our already low fixed services customer churn.”

Reserve price exceeded

The auction of the 700 MHz unsold lots began on Tuesday, 4 April. After almost a week of strong bidding between three companies, the auction concluded on Monday, 10 April.

The total revenue of more than $1.5 billion significantly exceeded the reserve price of around $857 million.

“This additional spectrum will help industry meet ever-increasing demand for high-speed wireless broadband,” said Acting ACMA Chairman Richard Bean. “The public has realised record rates of return from the sale and should now benefit from the services this 700 MHz spectrum can provide.”

This 700 MHz spectrum adds to the spectrum sold at auction in 2013, which is already used extensively throughout Australia to provide 4G mobile broadband.

“The sale of the remaining unallocated portion of the 700 MHz ‘digital dividend’ spectrum brings an important chapter in Australian economic reform to a successful close,” said Bean.

“It completes the digital dividend process begun in the 1990s, with the progressive conversion of free-to-air television from analog to digital technology enabling much better TV and a massive boost to high-speed wireless broadband in Australia.”

TPG’s 10 MHz lots cover the 738–748 and 793–803 MHz frequency ranges. Vodafone’s covers the 733–738 and 788–793 MHz spans.

The spectrum auctioned was that which was not sold at the digital dividend auction conducted in 2013.

Licences for the 700 MHz band have a term of 11.75 years. They will commence on 1 April 2018 and expire on 31 December 2029, aligned with the expiry date for licences issued after the 2013 digital dividend auction.

The winning bidders can choose to pay the winning price by 31 January 2018 as one amount, or in three annual instalments commencing in January 2018.

The reserve price for this auction was equivalent to the reserve price of $1.36/MHz/pop for 700 MHz spectrum in the 2013 digital dividend auction, but adjusted for the shorter licence term.

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