Today has been a wild day for the TPG Telecom Ltd (ASX: TPM) share price. After announcing this morning that it would be ceasing the roll-out of its mobile network, the share price has been up, down and up again. At close, the TPG share price was up 3.9% at $7.23.
It's clear that investors are weighing up the news and trying to evaluate the consequences of TPG's decision. The market has clearly affirmed that the announcement is fantastic for competitor Telstra Corporation Ltd (ASX: TLS) with shares up a huge 7.7%. Both stocks were traded on high volumes.
So what does the news mean for TPG's future?
TPG's mobile venture was likely to be a drag
TPG's proposed foray into mobile services as the nation's fourth mobile network operator was promised to make some waves. After all, the company had in May touted its 'Free Unlimited Mobile Data Plans' which were 'absolutely free' for the first six months and then $9.99 a month afterward.
While that kind of aggressive entrance would have been necessary for TPG to steal some market share from the far superior networks of Telstra, Vodafone and Optus, it's not clear if pricing so low would have been economically viable.
It was also worth doubting that TPG would have managed to build a viable network for the measly $600m price tag that Executive Chairman, David Teoh, had placed on it. By comparison, Telstra is thought to have coughed up approximately $3 billion of capital expenditure over three years in an effort to prepare its leading mobile network for 5G.
It's clear that TPG's network would have been miles behind its competitors, especially considering that it was planning on launching without voice services, which were expected to be offered later.
With all the doubts surrounding TPG's mobile network, it's not too surprising that the market hasn't reacted negatively.
Merger with Vodafone now more likely
The prospect of TPG entering as an independent competitor into the mobile telecommunications industry had been at the core of its concerns for the proposed TPG-Vodafone merger.
But even with TPG's mobile network no longer on the table, the ACCC isn't giving into the deal just yet.
In a statement to the ABC, ACCC chairman Rod Sims indicated that they would be giving 'more weight' to TPG's intentions before the merger was announced. "That's just standard practice."
"This is a fast-moving market and we need to think through how TPG and, indeed, Vodafone's strategies can evolve, and would evolve, with or without the merger, in the context of a market where fixed-line, which TPG's very strong in, and mobile, which Vodafone's very strong in, converge," he said.
Regardless, the chances of the merger going through are higher after today's announcement, a sure boon to the TPG share price.
