In morning trade the Vocus Group Ltd (ASX: VOC) share price has sunk lower despite the release of an update on its Optus partnership.
At the time of writing the Vocus share price is down 2.5% to $2.98.
What has Vocus announced?
This morning Vocus announced that it has completed the renegotiation and five-year extension of its current Mobile Virtual Network Operator (MVNO) agreement with Optus Wholesale.
Importantly, the new MVNO agreement includes access to the Optus 5G network and future technologies, putting Vocus in a position to grow its mobile customer base across its various brands and challenge Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM).
The company's managing director and CEO, Kevin Russell, appeared to be pleased with the agreement and the opportunities that 5G brings to Vocus.
He said: "Our new partnership with Optus gives Vocus security in the knowledge of our access to market-leading future technologies as well as the flexibility to put attractive mobile propositions in market in a timely manner."
Mr Russell also sees it as an opportunity to boost the company's margins in the future.
He added: "It also enables our Consumer resale business to rebalance its economics away from a complex and increasingly costly NBN wholesale broadband model to more sustainable and commercial margins in mobile."
What now?
I feel this is a positive development for the company, but not a game changer at this stage due to its low mobile penetration.
If the company can build a decent-sized mobile business in the coming years following the 5G rollout then it could give its margin a big lift. But given Telstra's dominance and the potential merger of TPG Telecom and Vodafone, I'm not overly convinced it will capture a meaningful slice of the mobile market.
So, for now I would suggest investors don't act on this news and focus on the prospects of its core business when making an investment decision instead.
