I have previously posted how TPG have a large problem ahead with their IT systems and how this will weigh down their earnings. As TPG have acquired more companies they have not migrated their customers on to a single computer platform. The IT systems for all the brands largely run independently. Each IT system has to be integrated to the NBN, Telstra wholesale, Vodaphone Wholesale, etc. The cost of building and then merging IT systems onto a new platform would probably cost hundreds of millions, with a high risk of disruption to customers.
So here’s the thing..... Vodafone have already spent hundreds of millions on their IT platform in Australia In addition it’s the same system they use worldwide. So the billions of dollars spent on IT development by Vodafone, is shared with the Australian subsidury. Chances are the cost of IT systems for Vodafone Australia look very cheap in comparison to the larger rivals. TPG were rapidly heading towards crunch time where they had to do something about their IT systems, or their support costs of maintaining so many systems and increased labour charges for using inefficient processes would become a big margin eroder. Lost sales opportunities as bundling mobiles, fixed, NBN, because billing systems are unable to deal with new bundle deals across all brands.
By merging with Vodafone and migrating all of their Customers to Vodafone’s computer systems, TPG will avoid hundreds of millions of dollars in costs and benefit from ongoing efficiencies. For TPG to remain a low cost carrier their existing IT systems are a massive Archilles heal. Merging solves this massive, largely unrecognised issue for TPG.
