TPG chief warns telcos are an essential service only when it suits

Australia’s telcos are increasingly positioned as essential service providers while being squeezed by high operating costs and regulatory and policy settings, TPG Telecom chief Iñaki Berroeta has said.

Speaking at the CommsDay Summit in Sydney, Berroeta warned the dynamics of the sector are heaping pressure on providers.

TPG is on its second attempt to strike a regional network sharing arrangement to defray the cost of serving users in less-populated parts of Australia after an earlier deal failed to gain regulatory approval.

Network sharing, Berroeta argued, was one thing telcos could do to try to make their existence sustainable.

“The need for doing things differently, to drive down costs, becomes increasingly vital when you dive into the health of this industry,” he said.

“Recently, several telco analysts pointed out the industry’s return on invested capital remains chronically below the weighted average cost of capital. 

“This means the cost for telcos to run and build their businesses has now overtaken the returns we need to continue investing.”

Berroeta called out the juxtaposition in the way telcos - and particularly, the services they supply - are treated today, and the way the sector is dealt with, particularly by authorities.

“All the big engines of life in Australia – from the cities to the bush – rely on the connectivity we provide,” he said.

“We are so essential to the productivity and drive of this nation, that our services and the incredible capability we provide are now taken for granted.

“Yet, the only time people seem to think about their telco now is when their phone or internet doesn’t work.

“This is the nature of our industry, and we accept this. But to think of telco as essential only when it’s convenient ignores the incredible effort and cost required to keep these networks going every day.”

Berroeta said the federal communications department and the government generally are “broadly aware” of the “unsustainable trajectory” of the sector with respect to operating costs.

Clearing the path for a network sharing arrangement with Optus would relieve some of the cost pressures on TPG, he indicated, and similar arrangements could help the economic viability of other telcos.

“To be frank, we need action now and network sharing is a way we can start the shift towards a more sustainable industry,” he said.

Berroeta noted that regulatory settings could also be improved - particularly the astronomical cost of mobile spectrum in Australia, which he said has cost the sector $8.5 billion over the past decade.

“In the coming decade we might have to spend billions more on spectrum while also upgrading to 6G if things don’t change,” he said.

“Spectrum remains some of the most expensive in the world, but not much thought is given to the essential nature of mobile services it underpins. 

“We cannot demand essential service output and disregard sustainability. Something needs to change.”

Berroeta also reiterated previous criticism by Vodafone - now owned by TPG - that well-meaning public policies to improve mobile coverage distributed public funding unevenly.

That line of criticism dates back to at least 2016 - perhaps earlier - and did eventually lead the government to test the waters to co-fund multi-operator sites, instead of single carrier ones.