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TPG Inflated Network Value To Fund Spectrum Purchase

TPG’s reclusive head honcho David Teoh has faced a tough public grilling in the Federal Court, where it’s been revealed he modified financial models to secure capital for his company’s abandoned mobile network.

TPG and Vodafone are in the Federal Court appealing against the Australian Competition and Consumer Commission’s decision to block a $15 billion merger between the two companies.

According to the AFR, TPG modified financials over the course of a weekend in 2017 while trying to raise $400 million to purchase mobile spectrum at a cost of roughly $1.3 billion, a record amount.

The court heard a network worth negative $290 million on a Thursday became valued at $779 million by Monday.

TPG increased its expected monthly customer acquisition to 60,000 from 45,000, lowered its weight average cost of capital to 8.3 per cent from 10, and increased its time frame by five years to 12 to up the network’s value in the face of a Macquarie Bank led equity raising.

A grilling by the ACCC’s counsel Michael Hodge, QC also revealed a lack of written documentation and planning for the network, which Teoh defended as the result of trying to avoid “bureaucratic” practices.

“We are quite agile,” Mr Teoh said.

“We talk quite frequently on the phone, so the company is quite dynamic.”

He said the company didn’t compile a business plan for the acquisition of spectrum because it had to move quickly to beat rival telcos, including Vodafone.

The network plans were abandoned shortly before TPG and Vodafone sought to merge.

In the past TPG has said its plans were scuppered by the government’s ban on Huawei technology.

Yesterday Mr Hodge had Mr Teoh instead claiming his company’s plans to build a network were abandoned due to a lack of spectrum.

The ACCC is seeking to defend its decision to block the merger by showing TPG would build a fourth network on its own, thereby increasing competition in the mobile market.

Vodafone and TPG claim they don’t have the power to compete with larger players Telstra and Optus on their own, and consumers would be better served if they were permitted to merge.

The hearing continues today and is expected to last another two weeks.

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