Vodafone closes in on 5G vendor, seeks early access to spectrum

Merger with TPG would help Vodafone ‘fast track’ 5G, CEO says

Credit: 38416505 © Tktktk Dreamstime.com

Vodafone Hutchison Australia (VHA) remains “fully committed” to a proposed merger with TPG, according to the telco’s CEO, Iñaki Berroeta. A merger would help Vodafone “fast track” the roll out of 5G technology, he today told a half-year results briefing.

“We continue to prepare for 5G,” the CEO said. VHA is in the “last stages” of selecting a vendor to source equipment from, after the telco’s 4G vendor, Huawei, was banned by Australia’s government from participating in the roll out of 5G.

Berroeta said VHA is weeks or maybe “a few months” away from completing the selection of a vendor. VHA continues to work on upgrades to its core network, the CEO said, and is pursuing early access to the 5G spectrum it purchased with TPG via a joint venture.

VHA is currently locked in a Federal Court case with the Australian Competition and Consumer Commission over the ACCC’s opposition to the proposed VHA-TPG tie-up.

VHA has argued that unless the merger goes ahead, it will struggle to fund upgrades to its mobile network to meet the growing customer demand for data: VHA has experienced a 55 per cent growth in data usage during the year, with customers on average downloading 8GB very month, Berroeta said today.

The CEO said that the six months to 30 June 2019 had been a “challenging” period for VHA but its performance has “remained stable in a very tough, competitive environment”. The telco’s subscriber numbers remained relatively static year-on-year, with a total mobile base of 5.99 million.

Average revenue per user declined 5.2 per cent to $34.52, however. Revenue for the first half dropped 1.7 per cent year-on-year, to $1.74 billion. The telco’s net loss grew from $92.3 million to $153.4 million, though without the AASB16 accounting changes it would have registered a loss of $131.8 million.

Acting chief financial officer Sean Crowley said the increased loss was driven by higher interest costs, and a higher depreciation and amortisation charge. The increased interest costs are due to the rebasing of VHA’s US$3.5 loan last December.

The increased depreciation was due to a full six-months of amortisation of the 700MHz spectrum compared to three months in the prior half, and a one-off charge relating to asset reclassification during the six-month period.

In its half-year results, Hutchison Telecommunications Australia — which owns 50 per cent of VHA — said that it had revised the useful life of VHA's network assets “from up to 20 years to between 3 and 18 years, which is consistent with the estimates adopted by VHA”.

The HTA document adds: “Along with the assessment of operating leases for AASB 16 resulting in the recognition of ‘right of use’ assets, this change was made having considered developments in the environment as VHA remains in the process of formulating its future RAN [radio access network] investment plan, as a result of the Government issued security guidance advising network operators that the use of 5G equipment supplied by banned vendors from certain countries would not be permitted due to national security concerns, as well as the announced proposed merger between TPG Telecom Limited and VHA to become a full-service telecommunications company in Australia.”

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Tags VodafoneTelecommunicationsTPGVodafone Hutchison Australia (VHA)5G

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Rohan Pearce

Rohan Pearce

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