A decision to Block a network and spectrum sharing contract between Telstra and TPG Telecom relies heavily on evidence that is not publicly available.
The full reasoning, released by the ACCC after it blocked Telstra and TPG Telecom’s proposed merger last week, is so heavily redacted in key sections that it’s not clear what influenced the regulator in its decision-making.
There are 815 redactions in the 216 pages of the full determination. [pdf]
The bottom line is that it may never really be possible for most people to know what the approval or rejection of the proposed deal depends on.
It is clear that the ACCC believes TPG Telecom can do better than to align with Telstra.
Preferred options in this regard – at least from the ACCC’s perspective – are that TPG Telecom undertake its own ‘targeted’ construction work in outskirts and regional Australia; or alternatively enter into a roaming or network sharing deal with Optus.
The ACCC said it could not guess what an agreement between Optus and TPG Telecom might look like, but was convinced that both had “strong commercial incentives to enter into a network sharing or roaming agreement” with the other.
“Any agreement between Optus and TPG will likely initially be for 4G roaming and could potentially transition to 5G roaming before culminating in an active sharing agreement,” the ACCC said.
“TPG and Optus may not be able to start active sharing right away. They could negotiate and agree on active sharing in the very short term, and it would be in their best interest to do so to ensure the convergence of spectrum and radio access network technology for a 5G rollout.
“However, it is more likely that they can start actively sharing between 2025 and 2028.”
Commercial incentive considerations for both TPG Telecom and Optus are entirely excluded from the provision.
As a result, on about 10 pages of the provision, little more than “[Redacted – Confidential]’ in each line.
Evidence from Optus ‘sufficiently credible’
It’s a similar story in the section on how Optus and its parent company Singtel say they would respond to a Telstra-TPG deal being approved.
The ACCC notes that this evidence was gathered from “internal documents and affidavits” which it says are “of sufficient credibility for the ACCC to give weight to it.”
The commission saw a “real chance that Optus will not proceed with its previously agreed regional 5G investment plan” if the Telstra-TPG deal goes through.
It didn’t think Optus would halt all infrastructure investments, but said the telecom company might struggle to get funding from parent company Singtel to fund an expansion.
“ACCC does not consider it unreasonable to expect that Singtel would be cautious in supporting investments where the NPV of an associated business case is only slightly positive,” it said.
exit conditions
The ACCC also said it had reservations about loose agreements in the Telstra-TPG proposal about what would happen if TPG decided to exit.
According to the ACCC, TPG can phase out after 10, 15 or 20 years “with a transition period of up to 36 months”.
“However, there is a lack of clear obligations and rights as the parties begin the transition, which may ultimately mean that TPG will act at Telstra’s behest in the exit negotiations,” the ACCC said.
“In a submission to the ACCC, Telstra notes the lack of specificity in exit procedures to ‘account for the fact that it is not currently known what the most efficient transition mechanism would be’ and to allow ‘flexibility’ for the parties.”
“While that may be true,” the ACCC said, it could also mean “a difficult path for TPG to operate competitively after the expiration or termination of the proposed transaction,” and the ACCC was not enthusiastic about that approach.
