TPG share price rises after dumping mobile roll-out

TPG's proposed foray into mobile services as the nation's fourth mobile network operator has been binned today, and investors have responded positively.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Today has been a wild day for the TPG Telecom Ltd (ASX: TPM) share price. After announcing this morning that it would be ceasing the roll-out of its mobile network, the share price has been up, down and up again. At close, the TPG share price was up 3.9% at $7.23.

It's clear that investors are weighing up the news and trying to evaluate the consequences of TPG's decision. The market has clearly affirmed that the announcement is fantastic for competitor Telstra Corporation Ltd (ASX: TLS) with shares up a huge 7.7%. Both stocks were traded on high volumes.

So what does the news mean for TPG's future?

TPG's mobile venture was likely to be a drag

TPG's proposed foray into mobile services as the nation's fourth mobile network operator was promised to make some waves. After all, the company had in May touted its 'Free Unlimited Mobile Data Plans' which were 'absolutely free' for the first six months and then $9.99 a month afterward.

While that kind of aggressive entrance would have been necessary for TPG to steal some market share from the far superior networks of Telstra, Vodafone and Optus, it's not clear if pricing so low would have been economically viable.

It was also worth doubting that TPG would have managed to build a viable network for the measly $600m price tag that Executive Chairman, David Teoh, had placed on it. By comparison, Telstra is thought to have coughed up approximately $3 billion of capital expenditure over three years in an effort to prepare its leading mobile network for 5G.

It's clear that TPG's network would have been miles behind its competitors, especially considering that it was planning on launching without voice services, which were expected to be offered later.

With all the doubts surrounding TPG's mobile network, it's not too surprising that the market hasn't reacted negatively.

Merger with Vodafone now more likely

The prospect of TPG entering as an independent competitor into the mobile telecommunications industry had been at the core of its concerns for the proposed TPG-Vodafone merger.

But even with TPG's mobile network no longer on the table, the ACCC isn't giving into the deal just yet.

In a statement to the ABC, ACCC chairman Rod Sims indicated that they would be giving 'more weight' to TPG's intentions before the merger was announced. "That's just standard practice."

"This is a fast-moving market and we need to think through how TPG and, indeed, Vodafone's strategies can evolve, and would evolve, with or without the merger, in the context of a market where fixed-line, which TPG's very strong in, and mobile, which Vodafone's very strong in, converge," he said.

Regardless, the chances of the merger going through are higher after today's announcement, a sure boon to the TPG share price.

Motley Fool contributor Cale Kalinowski has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended TPG Telecom Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

a young woman raises her hands in joyful celebration as she sits at her computer in a home environment.
Share Gainers

Why Clarity Pharmaceuticals, Kelsian, Life360, and Syrah shares are rising today

These shares are pushing higher on Thursday. But why?

Read more »

Man smiling on top of rocks with mountains in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were in a nervous mood today.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Beach Energy, Boss Energy, Cochlear, and Light & Wonder shares are pushing higher

These shares are having a good time on hump day. But why?

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a disappointing Tuesday session for ASX investors today.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Thinking of selling your CBA shares? This expert says you should hold on

CBA shares are up by about 80% since November 2023.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why Bannerman Energy, Clarity, DroneShield, Lotus Resources are charging higher

These shares are making their shareholders smile on Tuesday. But why?

Read more »

Person pretends to types on laptop drawn in sand.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors managed to ease out a gain from the markets today.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Paladin Energy, Santos, Tourism Holdings, and Woodside shares are racing higher

These shares are starting the week with a bang. But why?

Read more »