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Did Optus Outwit Teoh? TPG Shares Tumble On ASX

The value of David Teoh’s TPG Telecom plunged more than $1 billion on the ASX yesterday, with investors less than thrilled with the fortune Teoh paid last week to grab mobile spectrum at auction in a bid to become Australia’s fourth mobile net provider.

The market clearly believes Teoh has paid way too much and may never retrieve it. Commentators say the market believes Teoh will have to undercut Telstra, Optus and Vodafone on price, putting new pressures on its profits.

TPG paid $1.26 billion for an 11-year licence to use 2×10 megahertz of 700MHz spectrum and will pay at least $600 million – perhaps more than $1 billion – to build a network that can cover an estimated 80 percent of the Australian population.

Teoh has admitted he paid far more than TPG had expected to gain the spectrum. Optus relentlessly drove the price up, knowing that even if it didn’t get the spectrum, it would make life very difficult for the new contender.

Teoh may be thanking his lucky stars that Telstra was prevented from bidding in the auction, or the price he paid may have been even higher.

TPG shares closed at $5.50, down 17.4 percent, on the ASX yesterday, wiping more than $1 billion from its market value. Some 18.5 million shares changed hands.

Telstra shares also took a pounding, finishing on $4.00, down 4 percent on the day and 12 percent since TPG’s spectrum win last week.

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