Australia's competition watchdog has rejected a multi-year deal that would have seen Telstra and TPG Telecom sharing their network infrastructures in some parts of Australia. The Australian Competition and Consumer Commission (ACCC) cites the deal's likely negative impact on market competition and local users--a charge which TPG has rebuffed. 

The commission's decision comes after months of deliberation that began in May, when the two carriers applied for authorisation to allow Telstra's use of spectrum held by TPG. 

The deal encompassed three agreements that involved the sharing of mobile infrastructures and spectrum in selected regional and urban fringe areas across Australia, covering an estimated 17% of the local population. Apart from the use of TPG's spectrum, the pact also comprised the provision of Telstra's network services to enable TPG to offer 4G and 5G retail and wholesale services.

In addition, TPG would have transferred up to 169 of its existing mobile sites within the selected regional areas to Telstra, with plans to decommission the remainder. Under the pact, both telcos would continue to operate their own networks in metropolitan areas, covering 81.4% of the country's population. 

First announced in February when it was pipped as "landmark" network-sharing pact, the proposed deal was to span a decade with options for TPG to extend the agreement by five years. 

In its decision to reject the deal, ACCC said in a statement Wednesday that any reduction in market competition would have wide-ranging impact on customers, such as higher prices as well as reduced coverage and service quality. 

Pointing to TPG's plans to decommission its mobile sites, tap Telstra's mobile network services, and provide Telstra access to most of its regional spectrum, the commission said these arrangements would push TPG's national coverage up from 96% to 98.8%. 

While these would lead to some short-term benefits, including cost savings and efficiencies for both telcos, the proposed arrangements would eventually result in "lessen infrastructure-based competition", leaving consumers worse off over time, ACCC Commissioner Liza Carver said. 

She added that competing in markets where mobile networks operated separately pushed companies to enhance their coverage and pump in investment to deliver new technologies across more areas. Optus' efforts to improve its regional network, for example, had fuelled rival Telstra to improve its network to hold on to its market position, Carver said.

Noting that carriers competed on service deliverables that were influenced by the nature and extent of the core network infrastructures, she said: "We have looked beyond the potential short-term effects to consider the long-term impact from the reduced incentive to innovate and improve networks. We have concluded the proposed arrangements would likely significantly weaken this competitive process," 

It also was unclear whether additional spectrum from TPG would significantly help Telstra alleviate network congestion in regional areas, since the latter had alternative ways to do so. "It is unlikely the proposed arrangements would materially improve Telstra's ability to serve regional Australia. Instead, it would likely reduce the incentive for mobile companies to improve their service and coverage in regional areas," ACCC said.

The commission added that the proposed deal further entrench Telstra's dominant position in the local mobile market, since the telco would gain access to most of TPG's spectrum in regional and urban fringe areas. It also would result if Telstra holding on to a high proportion of key spectrum in these areas. 

Carver said: "Telstra is already the strongest mobile network operator in Australia and has a very high share of regional customers. The proposed arrangements would lock up valuable spectrum with Telstra, raising barriers to entry and expansion and reducing the incentives and ability of rivals to compete." 

TPG to request tribunal review, while Optus applauds decision

In its response, TPG said it was "disappointed" and would apply for the Australian Competition Tribunal to review the decision. 

The carrier's chief executive I?aki Berroeta described the commission's decision to block the network-sharing arrangement as a "missed opportunity" to provide more market competition and choice for local users. 

"The ACCC has chosen to ignore the overwhelming evidence submitted from leading economists, competition experts, and regional communities outlining the benefits of the proposed arrangement to competition and consumer choice," Berroeta said. "If it had been authorised, the arrangement would have freed regional Australia from its current mobile duopoly and the increased competition from TPG would have placed downward pressure on mobile pricing." 

TPG said the decision meant its 2022 financial year results would no longer include any associated financial impact from the Telstra partnership.  

One market player, though, has welcomed the ACCC's move not to authorise the deal.

Optus said the decision underscored the importance of "infrastructure-based" competition and investment. Its CEO Kelly Bayer Rosmarin said: "By knocking back this deal, the ACCC has helped ensure our regional communities will continue to benefit from competition in a sector that is fundamental to our digital economy and future prospects."

Optus previously said the deal allowed TPG to exit Australia's regional markets as well as deepen Telstra's dominance, in particular, across the regions, leaving consumers worse off with fewer options, higher prices, and poorer services. 

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