WWN #17 – Telstra: Big win in Mobile after a Big Loss

What’s Been Happening?

In the 2nd half of 2016, the Australian Competition and Consumer Commission (ACCC) asked for feedback on a discussion paper about declaring mobile services, which would force Telstra to let competitors’ customers onto its network in regional areas. The purpose behind the discussion paper was to determine if increased competition between telecommunication companies (telcos) could deliver better coverage to people across the country.

There were approximately 120 submissions made in response and most supported the status quo out of fear that Telstra’s coverage would shrink if it could not operate an exclusive network.

Telstra and Optus were opposed to the changes as both have been investing heavily in mobile infrastructure and argued that it was fundamentally at odds with the principle of “infrastructure competition”. On the other hand, Vodafone submitted hundreds of pages in favour of the declaration as it sought to bring an end to Telstra’s market dominance.

What Now?

The ACCC has released a draft decision today proposing that it will not declare a wholesale domestic mobile roaming service. In other words, it will not force Telstra and Optus to give other telcos access to use their infrastructure and roam on their network.

It has found that mobile roaming would not necessarily reduce Telstra’s retail mobile prices for users in regional, rural and remote areas and “could well result in overall higher prices if other service providers raise their retail prices to reflect the cost of roaming access prices, for example”. – Media Release by ACCC.

Telstra welcomed the draft decision with CEO Andrew Penn saying that it was the correct decision for the people of Australia as it would continue to encourage telecommunications investments and competition. Once the decision is confirmed, he said that the 4G coverage will be expanded to reach 99% of the population by later this year.

Vodafone issued a strongly worded statement to voice their disagreement with the decision, where “too many Australians will continue to be held hostage to Telstra” and was disappointed that a “scare campaign with no facts or substance has succeeded”.

The news has sent Telstra shares soaring by 4-5% to around $4.42 which was a much needed boost to its share price after falling by more than 7.5% in mid-April following its rival TPG’s announcement that it plans to build its own mobile network after having paid $AUD 1.26 billion for mobile spectrum.

Telstra Share Price 5th May.png

Credits: Yahoo Finance Charts, Telstra’s Share Price between April 12 and May 5 2017

 

What’s Next?

The ACCC has invited submissions on the draft decision until 2 June 2017 after which it is expected to hand down its final decision.

References:
http://www.smh.com.au/business/telstra-warns-of-untimely-end-to-mobile-coverage-race-if-roaming-is-declared-20161215-gtbme7.htmlhttp://www.abc.net.au/news/rural/2017-05-05/telstra-optus-let-off-providing-free-mobile-roaming-to-telcos/8499582http://www.smh.com.au/business/telstra-has-big-win-in-battle-for-bush-mobiles-20170504-gvywu2.html

 

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