What’s the deal with TPG?
TPG’s results to 31 July 2016 provided the market with its first full 6-month period snapshot of the company including the iiNet acquisition.
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Sean Young
:
Hi Stuart,
How crucial do you think scale/size of the teleco’s will be when the race for NBN market share heats up? Seems the smart players have been setting themselves up for long term gain. In your opinion is this a long term theme to play out or could it be more rapid? The recent margin compression with TPG seems to have caught the market by surprise.
Your opinion would be much appreciated.
Kind Regards,
Sean
Stuart Jackson
:
Hi Sean, there is definitely a scale benefit to be generated by RSPs in a NBN world. Scale advantages are derived from: 1) fixed cost leverage in providing billing, customer support and sales, 2) Volume discounts on CVC charges from NBNCo, and 3) greater customer diversity means an RSP can get more from a fixed amount of capacity purchased by using that capacity more evenly throughout the day. In the longer term, the better positioned players in the market will be able to leverage existing infrastructure and investment to create a cost advantage. This is more limited at the moment due to NBNCo’s legislated monopoly over the network, but this monopoly is expected to expire after 2019.