Why all eyes will be on Telstra shares this week

Will Telstra get to work with TPG in regional areas?

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Key points

  • The ACCC decision on Telstra’s regional deal with TPG is going to be announced this week
  • The two businesses want to access each other’s regional telco assets to improve service for customers
  • Telstra says this would increase its wholesale revenue

Telstra Group Ltd (ASX: TLS) shares will be under the spotlight this week as it's announced whether the telco is allowed to enact its regional sharing agreement with TPG Telecom Ltd (ASX: TPG).

According to reporting by The Australian, the Australian Competition and Consumer Commission (ACCC) will, three days before Christmas, hand down its final determination on the Telstra and TPG agreement.

Preliminary views

The ACCC released its Statement of Preliminary Views at the end of September 2022.

It said a number of things including:

The ACCC considers that a healthy secondary market for spectrum licences allows spectrum to move to its highest value use and allows for the deployment of new and innovative services over time. This includes situations in which the ACMA (Australian Communications and Media Authority) has imposed allocation limits on the auction of a band on the advice of the ACCC.

However, the ACCC is concerned that very concentrated holdings of spectrum create a disincentive for incumbent licensees to dispose of licences surplus to their technical or commercial requirements and create an incentive to 'lock up' this scarce resource. The ACCC is considering the ways in which the proposed transaction increases the concentration of spectrum holdings through the third-party authorisation, and the impacts this may have over the longer term on industry structure.

Optus suggests that there will be "considerable public detriment flowing from a lessening of price tension in the mobile market as a consequence of TPG's prices being dictated by access costs set by Telstra."

What are Telstra and TPG actually trying to do?

The deal could affect both Telstra shares and TPG shares.

If approved, Telstra would "obtain much of TPG's mobile spectrum" in outer-suburban and regional areas, where approximately 17% of Australians live. Telstra will also obtain 169 of TPG's mobile sites in that area.

TPG would shut down its remaining 556 mobile sites in those areas and acquire mobile network services from Telstra for mobile coverage.

Telstra said that this deal would provide "significant value to Telstra's wholesale mobile revenue, while providing TPG Telecom group's subscribers with 4G and 5G services".

It would allow Telstra to grow its network and increase capacity.

The Telstra CEO at the time, Andy Penn, said:

Similar to monetising our passive infrastructure, it allows Telstra to have an innovative way of monetising some of our active mobile infrastructure, in areas where the population coverage is much smaller and more challenging in terms of returns and further investment and where there are already a number of competitors.

Additional scale from this agreement therefore supports return on invested capital in these areas and makes ongoing investment in the network and innovation more sustainable.

Snapshot of the share prices 

Over the last month, the Telstra share price has gone up around 3% and the TPG share price has gone down 1%.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Tpg Telecom. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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