Is NBN Co a serious threat to TPG Telecom Ltd's fibre network?

NBN Co plans to accelerate the installation of its fibre network to apartments and office buildings

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Broadband provider TPG Telecom Ltd (ASX: TPM) announced last year that it was planning to roll out its own residential fibre network to around half a million apartments, in competition with the National Broadband Network (NBN).

Now NBN Co, the company building the NBN, is moving to cut off that threat by accelerating plans to connect apartments and office buildings in Australia's capital cities to its fibre network.

NBN Co's new chief executive, Bill Morrow, said, "the NBN levels the playing field for Australian telecommunications and creates real and vibrant competition. We can make this statement because the NBN doesn't sell directly to consumers and is open to all retail service providers to use on equal terms". He added, "a building signing up with TPG runs the risk of being left with only one retail service provider – TPG itself."

TPG's competitor, Telstra Corporation Ltd (ASX: TLS) has also criticised the company's plan, saying it would undermine the economics of the NBN. NBN Co's plan was for metropolitan users to subsidise the costs of rolling out the fibre network in regional and remote areas. If other carriers follow TPG's example, they appear to put the NBN at complete risk.

TPG's CEO David Teoh has hit back at critics of the plan, saying that even with 500,000 connected apartments, the NBN is such a large project, what TPG is doing is quite small. The problem for the apartment blocks is that once there is one fibre provider in the building, it would be difficult for another provider to also offer fibre-based plans. One analyst suggests there would be technical problems that would limit apartment blocks to one provider only.

If TPG runs through with its plans, the company will likely become Australia's second-largest network owner. Optus – owned by Singapore Telecommunications Ltd (ASX: SGT) is reportedly selling its cable network to NBN Co.

Foolish takeaway

TPG says it will offer its fibre network to other internet service providers like M2 Group Ltd (ASX: MTU) to re-sell data plans, while offering its own customers better broadband plans than if it used the NBN's network. It's a risky gamble, but if it pays off, could see TPG cast alongside Telstra as our two largest telcos.

Motley Fool writer/analyst Mike King owns shares in M2, TPG Telecom and Telstra. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »