The TPG Telecom Ltd (ASX: TPG) share price is rising on Thursday.
In morning trade, the telco giant's shares are up 0.6% to $4.91.
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Why is the TPG share price rising today?
Investors have been buying the company's shares today after the Australian Competition & Consumer Commission (ACCC) gave the company a big boost.
According to the release, the competition regulator will not oppose the regional network sharing arrangements between TPG Telecom and Optus to create a regional Multi-Operator Core Network (MOCN).
TPG has welcomed the clearance of its regional network sharing arrangement with Optus by the ACCC.
The company's chief executive, Inaki Berroeta, believes the decision marks a new era for mobile services competition and consumer choice in rural and regional Australia. Berroeta said:
We are pleased with today's decision and thank the ACCC for its consideration of our regional network sharing arrangement which will bring much needed competition to rural and regional areas.
With this arrangement, for the first time the TPG Telecom mobile network will cover most towns in Australia. We are excited about the opportunity to extend the reach of our award-winning mobile services to even more people and businesses, and to deliver more competition and choice to all Australians.
What now?
With the implementation of a MOCN, TPG Telecom will gain access to Optus's regional mobile network across 2,444 regional sites. This boosts TPG's network coverage to 98.4% of the Australian population. This includes Optus' 4G network and 5G network as it becomes available.
When launched, TPG Telecom will deliver 4G and 5G services to thousands of new places and towns and give Vodafone, TPG, iiNet, Internode, Felix, and its MVNO customers access to a million square kilometres of mobile coverage across Australia.
Berroeta expects the MOCN to drive the company's growth in regional areas. He adds:
The expansion of our regional mobile network will drive growth in our customer base in regional and metropolitan areas. It will allow us to win and retain customers in the cities who need reliable mobile service when they travel to the bush and customers in the regional areas looking for a different choice of provider.
What will this cost?
TPG confirmed that it continues to expect its total payments to Optus to amount to approximately $1.17 billion over the 11-year term. However, this represents around one-third of the costs TPG Telecom would expect to incur to build, operate, and maintain a similar network in regional Australia.
In FY 2024, management expects to recognise $230 million to $250 million of non-cash charges related to the 755 total network sites within the MOCN area to be decommissioned.
Whereas in FY 2025, it expects a negative EBITDA impact of approximately $55 million to $65 million, inclusive of MOCN fees to Optus, operating expense savings, spectrum receipts from Optus and increased go-to-market expenses.
This will be offset on a cash basis with a $50 million reduction in capex requirements. A negative NPAT impact of approximately $10 million to $20 million is estimated in FY 2025.
The TPG share price remains down 13% over the past 12 months.
