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The Huawei ban in Australia hurts not only TPG but also 5G planning.

via:ofweek     time:2019/9/9 14:11:52     readed:50

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TPG's after-tax profits fell 56.2% to A$174 million ($119 million) in the last fiscal year ended July 2019, according to the results released recently. Revenue has hardly changed, close to A$2.5 billion ($1.7 billion), but is banned by the government.HUAWEIAfter that, the decision to cancel the mobile network caused TPG to lose about A$166 million (US$114 million) in net profit. The additional cost associated with Vodafone trading, the cost of TPG's opposition to regulatory action, reached A$6 million ($4 million).

As for the impact of NBN, TPG currently says that the so-called "business as usual" EBITDA (earnings before deduction of interest, taxes, depreciation and amortization) in the current fiscal year was only A$730 million ($503 million to $514 million), compared with A$824 million ($564 million) in the previous fiscal year. The shift from business to NBN is the main reason for the expected decline.

Other telecom operators in Australia, including Telstra, are also heavily affected by NBN, which is cutting thousands of jobs as business shrinks. But TPG has been a major victim of Huawei's ban. Using alternative suppliers to build a new mobile network is obviously not an option, which forces TPG to abandon its mobile network launch plan. All this shows that Huawei offers better terms than its competitors, and/or technologies considered superior to those of its competitors.

Whether or not the ban helps Australia to be less vulnerable to Chinese hackers and cyber espionage (for government reasons), its impact on TPG will also lead to delays in Australia's 5G deployment. TPG's new mobile infrastructure will bring new competition to market leaders Telstra and Optus (a subsidiary of Singapore Telecom), which rely entirely on Nordic 5G suppliers (Telstra uses Ericsson devices, Optus works with Ericsson and Nokia).

To complicate the issue, Australian regulators opposed the merger of TPG with Vodafone, Australia's third-largest mobile operator. After eight months of decision-making, Australian authorities blocked the merger in May, fearing that the two operators would inevitably bring huge competition if they came together. This logic is hard to understand. TPG generated only $108 million ($74 million) of its A$1.46 billion ($1 billion) in consumer revenue last year from mobile services, while Vodafone's presence in Australia's fixed-line sector is negligible. If a market with only three service providers is unacceptable, why only two 5G providers can meet the requirements?

Vodafone's 5G plan seems to have been suspended as it struggles to secure the deal. After Telstra announced its deal with Ericsson and its 5G service plan, Vodafone had little to say about 5G since December last year, when it agreed to spend A$263 million ($180 million) on new spectrum rights. In its financial results released in July, it also made "mobile network expansion and evolution to 5G" a priority this year. Not surprisingly, there's nothing more substantial, because it's not easy to plan for the future when the current deal is still in doubt, because the stakes may be high.

Policymakers, telecom operators and equipment manufacturers all believe that 5G will further consolidate the future digital economy. If they are right, then those countries that lag behind in 5G development will suffer huge losses. In terms of banning Chinese suppliers and opposing integration, Australian authorities have clearly blocked the 5G plans of the two network operators.

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