TPG Cans Mobile Network, Blames Huawei Ban

In 2017 TPG announced this it would be launching a $600 million mobile network.

The plan was to have Huawei as its primary equipment provider - a decision that was complicated last year when the Federal Government banned the Chinese vendor from selling 5G equipment in Australia.

Now TPG has decided to cease its mobile rollout, naming the ban as the reason.

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The announcement was made on the ASX earlier this morning, stating that its upgrade path to 5G has been blocked and that an affordable solution couldn't be found.

The government announced its ban of both Huawei and ZTE products from the 5G network in August 2018 - citing security concerns.

"The Government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorised access or interference."

To date, the rollout has cost the company $100 million in capital expenditure. Prior to Federal Government's August 2018 announcement TPG had bought equipment or 1,500 sites, and had fully or partially completed the implementation for over 900 small cell sites.

An additional $30 million had also already been committed to the rollout.

It will be interesting to see if this development will impact on the ACCC's decision regarding a proposed merger between TPG and Vodafone.

Last year the ACCC stated that it wanted Vodafone to become Australia's fourth mobile network provider in order to keep the telco environment competitive.

"The ACCC is concerned that the proposed merger may substantially lessen competition in the market for wholesale mobile services nationally," the commission stated in December 2018.

"The ACCC’s preliminary view is that the removal of TPG as a fourth mobile network operator (MNO) may result in higher prices for wholesale services and more restrictive conditions for wholesale customers," it added.

TPG didn't offer much in regards to the merger in today's statement, merely implying that the plan is still in motion.

"The board is not in a position at this time to announce any decision on its future strategy for TPG’s current spectrum holdings,” TPG said.

"While TPG remains committed to the planned merger with Vodafone Hutchison Australia, the company must continue to make independent business decisions in the best interests of TPG shareholders pending the outcome of the merger process."

"The company does not expect any impact from this decision on its FY19 guidance and does not anticipate having to write-down, at this time, the mobile network costs capitalised to-date."

The ACCC's decision is expected to be announced on April 11.

TPG's announcement also comes on the same day that the Trump Administration announced indictments against Huawei in the U.S.

Federal prosecutors have accused vendor of violating U.S. sanctions against Iran, as well as stealing trade secrets and obstructing justice.

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