A very good mate of mine works in the Telco space and we have had extensive chats in terms of the changing landscape. She told me that Teoh's play to get more spectrum in Singapore and Australia is quite a dangerous play. It would involve plenty of capex if he wins either spectrum and he doesn't have enough money on balancesheet to fund it.
Telco:
It is a very costly exercise with very little backing compared to the other carriers if he wants to make a spectrum play (from the looks of it he does). Voda has Vodafone global to back it, along with Hutchison (Li Ka Shing), Optus has Singtel, Telstra is a behemoth as it has never sold any of its towers, they have the strength of the network.
I admire Teoh's brave move and bold plans to revolutionise the market, however I hope he doesn't get bullied along the way. I hope you guys still remember OneTel, who got bullied by Optus and Telstra by jacking up the spectrum cost and charging high roaming fees by the respective competitor carriers.
Understanding that overseas in Europe and US, there are numerous carriers, however in Australia we dont have the population to warrant a fourth carrier. If he comes in and becomes successful, one would have to fail (most likely voda), or we will have Optus and Telstra coming in to spoil the party to maintain their market share.
Broadband:
NBN is coming and it will really eat into the internet space with their higher rental cost, measured by a % of cost recovery for the project over "x" amount of years. The longer they drag it out, the costlier it will be for the likes of TPG to rent from them. I suspect margins would decrease dramatically and unless they acquire new customers, there isn't really much to do. TPG doesn't have the network capability of the other carriers to offer mobile data to bypass NBN if they want to.
It is an uphill battle for Teoh and his team, and I hope that he gets there as I believe in the true Aussie spirit of hard yakka. But in the meantime, I will just sit on the side line and spectate. There is money to be made in Telco, however not in the carrier space, more in the IOT space.
Just my 2 cents
GL DYOR
TPM Price at posting:
$7.12 Sentiment: None Disclosure: Not Held
