ACCC -need to be held accountable, page-122

This is from today’s AFR

Has the Australian Competition and Consumer Commission’s (ACCC) own expert witness put a big hole in the argument against a merger of TPG Telecom and Vodafone Hutchison Australia?

That was the impression Chanticleer had after hearing a chunk of evidence from Mike Wright, the former head of networks at Telstra, who is appearing as the ACCC expert.

Wright told the Federal Court on Tuesday that if the merger didn’t go ahead, Vodafone would have only months before the rapidly diminishing capacity of its mobile network forced it to make major changes to the data levels it provides to customers.

That might be done by raising prices, throttling data download speeds, and/or changing its mobile plans to essentially discourage customers from using so much data.

Wright was effectively saying that Vodafone would need to stop competing as hard as it is now if the court confirms the ACCC’s position and blocks the merger.

The mobile network plan devised by TPG's David Teoh looks like a big risk. Getty
It’s hard to escape the obvious inference if the deal cleared, it would allow Vodafone to get it hands on mobile spectrum that TPG owns and make the merged entity a stronger competitor to Telstra and Optus.

Wright's expertise shone through in the witness box, and that made his view’s on TPG’s mobile network all the more weighty.

Wright said the macro-cell network that TPG originally planned was always going to be substandard.


But while the small-cell network plan that TPG then reverted to – which was to be focused on the CBDs in Australia’s biggest cities – was a better option given its level of investment and spectrum holdings, it still had obvious limitations, as coverage would be patchy indoors, and even in the inner city suburbs around the CBD.

In a bid to help the ACCC make its case that TPG would be forced to revive its abandoned plan to role out a mobile network if its merger were blocked, Wright has also sketched out a hypothetical plan for TPG to move into 5G.

Under his model, it could complete the rollout of the small cell, small-coverage 4G network and then add what’s called a 5G midpoint network.

Like it says on the tin, this involves putting extra kit at the midpoint between each small cell. But the plan would be expensive and difficult to execute, given you’d need to win over community groups to erect the extra antennas. And coverage would still be pretty patchy, Wright told the court.

So to summarise, the evidence from the ACCC’s expert suggested if the merger were blocked, Vodafone would almost immediately need to make itself less competitive by offering customers less data.

And then TPG could complete the rollout of a 4G network that it says it won’t build, and then spend a lot more money to build a 5G network that would still be pretty uncompetitive.

Now, it should be said that the entire episode of the 4G network would have some TPG investors questioning the market’s “David Teoh is a genius” mantra.

If the 4G network plan was simply a way of forcing Vodafone into a merger, then Teoh has taken a gigantic risk spending $1.26 billion on mobile spectrum that could yet prove useless to TPG.

And if he was serious about rolling out a 4G small cell network, then he is taking an equally large risk on a plan with serious limitations.

But that’s not the guts of this case.

The ACCC needs to show that blocking this merger will help competition. Mike Wright’s evidence didn’t appear to help do that.