Telstra share price lower after ACCC blocks TPG deal

The ACCC has said no to the two telcos teaming up…

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Key points

  • Telstra and TPG want to share mobile network access
  • The ACCC has blocked the deal on competition concerns
  • Telstra expected the deal to boost its revenue by over $1.5 billion

The Telstra Group Ltd (ASX: TLS) share price is under pressure on Wednesday.

In morning trade, the telco giant's shares are down 0.5% to $4.02.

This compares unfavourably to the ASX 200 index, which is up 1% in early trade.

Why is the Telstra share price falling?

The Telstra share price is underperforming today after the Australian Competition and Consumer Commission (ACCC) blocked the company's proposed regional mobile network arrangements with rival TPG Telecom Ltd (ASX: TPG).

Earlier this year, Telstra and TPG signed a ground-breaking ten-year regional Multi-Operator Core Network (MOCN) commercial agreement.

Under the deal, TPG would gain access to around 3,700 of Telstra's mobile network assets, increasing TPG Telecom's current 4G coverage from around 96% to 98.8% of the population. Whereas Telstra would gain access to TPG's spectrum across 4G and 5G, which will allow it to grow its network and increase capacity.

Telstra estimated that the deal would deliver between $1.6 billion and $1.8 billion of revenue over the initial 10-year term.

ACCC says no

Unfortunately, the deal has been vetoed by the ACCC.

The competition watchdog notes that under the statutory test, it must not grant authorisation unless it is satisfied the proposed arrangements would not be likely to substantially lessen competition, or that the likely public benefits from the arrangements would outweigh the likely public detriments.

However, after an extensive public consultation and investigatory process, it is not satisfied under either of these tests and therefore cannot grant authorisation.

The ACCC's commissioner, Liza Carver, explained that mobile networks are incredibly important and any reduction in competition could negatively impact customers. And while she saw some benefits from the proposed agreement, they were outweighed by competition concerns. She said:

We examined the proposed arrangements in considerable detail. While there are some benefits, it is our view that the proposed arrangements will likely lead to less competition in the longer term and leave Australian mobile users worse off over time, in terms of price and regional coverage.

Mobile networks are of critical importance to many aspects of our lives, including our livelihood, our wellbeing and our ability to keep in touch with friends and family. Any reduction in competition will have very wide-ranging impacts on customers, including higher prices and reduced quality and coverage.

The TPG share price is currently down 2% on the news.

Motley Fool contributor James Mickleboro 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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