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BREAKING NEWS: TPG Axe Mobile Network Over Huawei Saga

Undone by factors “outside its control”, TPG Telecom has ceased the roll-out of its Australian mobile network, citing the local government’s ban on Huawei telco equipment a key contributing factor.

The news comes as TPG continues to await ACCC approval over its proposed $15 billion merger with Vodafone Hutchinson Australia.

The decision has reportedly been delayed to April after the regulator voiced “preliminary concerns” in mid-December.

Disclosed to the ASX today, TPG claims the ban on its principal equipment vendor – Chinese giant Huawei – means there’s no┬ácommercial sense to invest further funds (beyond that already committed) to a network which cannot upgrade to 5G.

The company’s upgrade plan was blocked after the local government banned Huawei equipment within Australia’s 5G network in August 2018.

TPG states it continued to roll-out Huawei equipment prior to the government’s announcement, however, concludes there’s no commercial sense to pursue.

Executive Chairman, David Teoh, asserts it’s “extremely disappointing” the company’s strategy has been undone by factors outside its control.

“While TPG remains committed to the planned merger with Vodafone Hutchinson Australia, the company must continue to make independent business decisions in the best interests of TPG shareholders pending the outcome of the merger process,” remarks Teoh.

The telco does not expect any impact to its FY19 guidance, and at this time does not anticipate having to write-down mobile network costs capitalised to-date.

To date, TPG Telecom has incurred a network roll-out capital expenditure of appropriately $100 million.

Prior to August 2018, the telco purchased equipment for 1,500 sites, and has fully or partially completed the implementation of just over 900 small cell sites.

The telco has already committed additional capital expenditure of around $30 million.

TPG Telecom’s board states it’s not in a position to announce any decision on its current spectrum holdings.

After carefully considering available options, management states it will update the market accordingly.

Shares in TPG Telcom spiked at the open, however, are now trading relatively flat at $6.90.

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