Motley Fool's Article, page-5

I suspect the mobile roaming decision was something that TPG maybe did not expect... however, it seems the ACCC expects commercial network access to be granted. So perhaps Vodafone could approach Telstra/Optus and ask for access to their coverage and expect to get it. But, they have opted to mount a legal challenge and try to get free access instead.

I make that point because I think that TPG can potentially offer coverage as good as Telstra via a commercial network agreement.

I then expect they will come to the market and offer mobile plans with either really generous data plans or unlimited data.

I would then expect Telstra and Optus to respond in kind, e.g. Telstra also offers unlimited data, but after X amount the speed is reduced to 3G instead of 4G.

I assume Vodafone will as have to respond as well, as they have always been positioned as the low cost value provider in the mobile space.

Of the three, Vodafone have the most to lose if they can't beat TPG on value. If Vodafone are no longer the lowest cost provider, why would anyone stick with them instead of signing up to TPG? The only reason anyone is on the Vodafone network is because they want value and they're price sensitive. Switching mobile carriers is painless, even more so when TPG offer you 6 months at half-price.

Vodafone have spent a truck load of capex in Australia and their financials/returns on the venture are pretty poor. Further price cuts (reducing ARPU) is pretty much like cutting their own throats and bleeding out a slow and painful death.

I basically expect sooner or later that TPG will get the majority of Vodafone customers. I see a few scenarios:

1. Vodafone use TPG as a MVNO (the opposite to what's happening now)

Vodafone realise they're simply losing too much money investing all this capex in Australia and not getting an adequate return. Using TPG as a MVNO stems the bleeding as they no longer have to invest huge amounts of capex. TPG would be well and truly on board with this, it immediately gives them 7 million customers and a positive NPV on their investment.

2. TPG acquire Vodafone Australia

I see this one as being unlikely because:

- TPG can erode the value of Vodafone Australia. Why pay for something you could pick up cheaper in a few years' time?
- balance sheet is stretched and unlikely to get the funds and doubt a capital raising would be on the cards

3. Some kind of JV between TPG and Vodafone

I also see this as unlikely as what does TPG need Vodafone for?

If it's a chess match, I see Vodafone's position as only having the King and a few pawns left, while TPG is left with a King, Queen (fibre/business), two horses (NBN/FTTB) and half a dozen pawns (Singapore mobile, deploying mobile towers, cell sites, etc.). Vodafone can run, but it's only a matter of time before TPG win. Every move Vodafone make is just delaying the inevitable check-mate.