Aborted mobile rollout leaves A$237m dent in TPG financials

TPG Telecom’s (ASX:TPM) aborted mobile network rollout plans have hit the telecommunications provider’s finances for the year to the tune of A$236.8 million.

The publicly-listed telco halted its mobile network rollout in January after the Australian Government banned the use of equipment made by Chinese telecommunications manufacturer Huawei – slated to be a key equipment supplier for the network – in Australian 5G networks.

In its preliminary financial report for the year ending July 2019, published on 5 September, TPG told shareholders that its decision to halt the rollout of its mobile network result in an impairment expense of $A236.8 million.

The scrapped rollout also led to an increase in amortisaton and interest expense related to mobile spectrum licences it bought to enable its mobile play, the company said.

The company’s results were also impacted by A$9 million in one-off transaction costs associated with its planned merger with Vodafone Hutchison Australia, which has been put on ice by the Australian competition watchdog.

On 30 August last year, TPG and Vodafone Hutchison Australia entered into an agreement to merge their two businesses and establish a combined entity that would boast both TPG’s fixed line infrastructure and Vodafone Australia’s mobile network.

However, the move was opposed by the Australian Competition and Consumer Commission (ACCC). TPG and Vodafone Australia subsequently launched legal proceedings in the Federal Court in a bid to have the decision reversed.

The case is set to be heard in the Federal Court from 10 September and wrap up within three weeks of that date. If the Court sides with TPG and Vodafone Australia, and the merger does eventually go ahead, the merged group will be listed on the Australian Securities Exchange (ASX) and renamed TPG Telecom Limited.

These factors, among others, contributed to a 56 percent tumble in TPG’s profit for the year, to A$175 million. The company’s preliminary reported earnings before interest, tax, depreciation and amortisation (EBITDA), meanwhile, came to $572.6 million, well short of the $A826.7 million it notched up the prior year.

However, TPG saw only a relatively minor 0.7 percent drop in revenue during the period, to nearly A$2.5 billion, although the company said that EBITDA continued to be adversely impacted by the loss of margin as DSL and home phone customers migrate to low margin National Broadband Network (NBN) services.

The effects of the NBN rollout are set to be felt for at least another year, with TPG telling shareholders that its 2020 financial year is expected to be the year that suffers the greatest impact from customer migration to the NBN. Indeed, the combined impact from residential DSL and home phone customers migrating to the NBN is expected to be around $85 million for the group.

TPG said that the annualisation of the deterioration of profitability of existing NBN customers experienced in the second half of the company’s 2019 financial year as a result of increased NBN wholesale cost per user is forecast to create a further NBN headwind for FY20 of approximately A$25 million.

It is anticipated that, by the end of FY20, TPG will have less than 15 percent of its residential broadband customer base remaining on ADSL, as more customers migrate to the NBN.

“Operating cost efficiency programs across the Group are expected to continue to deliver savings and another of growth is forecast for the Group’s Corporate Division but, in this peak year of NBN headwinds, organic growth for FY20 is not expected to be sufficient to offset the headwinds,” the company told shareholders.

ACMA takes aim at 5G innovation with class licensing updates

The Australian Communications and Media Authority (ACMA) hopes to support new innovative technologies and wireless data communications systems, including those underpinning 5G, with a range of fresh updates to the country’s class licensing arrangements.

The ACMA’s proposed variation to Australia’s Radiocommunications (Low Interference Potential Devices) Class Licence came into effect on 19 August, with the new licensing arrangements expected to support new technology applications and “bring Australia into line with international arrangements”.

Among the changes, which are contained in the Radiocommunications (Low Interference Potential Devices) Class Licence Variation 2019 (No. 1), are new arrangements for ‘all transmitters’ in the 57–64 GHz band aimed at supporting new interactive motion sensing technology that operates in this particular frequency range and can be used to enable touchless control of device functions or features.

Other changes include an expansion of frequency range for 60 GHz (57–66 GHz) data communication systems to now cover 57–71 GHz, for both indoor and outdoor usage, which the ACMA suggests will support wireless gigabit systems with applications such as backhaul for 5G and Wi-Fi.

The updates also saw the revision of arrangements for underground transmitters in certain bands, a move designed to support fixed and mobile services from 70–520 MHz to provide improved support for underground activities, such as mining.

Additionally, the new class licensing variation includes a revision of arrangements for radars in the 76–77 GHz frequency band in order to provide support for radar use in rail crossing and road safety applications.

There are also new arrangements for ground and wall penetration radar (30–12,400 MHz) to facilitate the usage of applications across a variety of industry sectors, such as agriculture, railways and underground pipe detection in the telecommunication industry.

Some of the new changes also work to align existing arrangements for ultra-wideband devices with United States and European arrangements for generic, indoor and outdoor devices operating in 3,100–3,400 MHz and 8,500–9,000 MHz ranges, along with aircraft applications (6,000–8,500 MHz), aimed at further supporting the use of such devices in Australia.

The ACMA first put the call out to industry for comment and feedback on its proposed updates to class licensing arrangements in December 2018. The updates were to be implemented by varying the Radiocommunications (Low Interference Potential Devices) Class Licence 2015 (LIPD Class Licence).

Now that the updates are in effect, the ACMA invites further suggestions from industry and individuals on devices and technologies for “possible future updates” to class licensing arrangements of the Low Interference Potential Devices Class Licence. 

Norway comms regulator extends use of 2300–2400 MHz band until 2022

Norwegian communications regulator Nkom has decided to extend the use of the 2300–2400 MHz frequency band until December 31, 2022.

Nkom is now inviting applications for permits to use parts of the band from January 1, 2020, with applications to be submitted by October 29. The regulator plans to allocate the entire spectrum band for mobile broadband from 2023.

Nkom provided several reasons for continuing the existing use of the 2300–2400 MHz frequency band. According to the regulator, there is no other established and full-featured option for high-performance video PMSE (Programme-Making and Special Events).

In addition, Nkom believes there will be synergy gains from allocating the 2,300–2,400 MHz band for mobile broadband alongside the bands 2,600 MHz and 3,400–3,800 MHz when permits for those expire on December 31, 2022.

The decision is expected to impact broadcasters NKR and TV2, both of which will be allocated 10 MHz for use until December 31, 2022.