Telecommunications Giant Writes Off Billions and Strikes .6 Billion Deal with TPG

Singtel, the parent company of Optus, recently had to write off billions of dollars due to the telecoms group’s issues and the declining Australian economy. In an effort to raise funds, Optus has signed a .6 billion deal with rival TPG Telecom.

The $S3.1 billion (.5 billion) write-down by Singtel, which was disclosed in Singapore early on Monday, was primarily related to Optus. Optus has been experiencing challenges with declining revenues in its enterprise division, which serves government and commercial clients. To address these financial pressures, former New South Wales premier Gladys Berejiklian oversees Optus.

Despite facing a cyberattack and nationwide network failures over the past 18 months, Optus is working to rebuild consumer trust. The company is also in search of a new CEO following the departure of Kelly Bayer Rosmarin. Singtel assured investors that the write-downs would not impact dividend payments and highlighted that a new agreement with TPG has helped alleviate some financial strains.

According to Michael Venter, acting CEO of Optus, the majority of the write-downs reflect a concerning outlook in the enterprise market. With businesses shifting towards internet-based services like Zoom, traditional phone call services are on the decline, impacting profitability. Telstra is also undergoing reorganization in response to dwindling earnings.

The new agreement with TPG will expand the geographic reach of TPG’s mobile services for Lebara and Vodafone customers. TPG CEO Inaki Berroeta emphasized the importance of competitiveness in regional Australia.

Last year, a .8 billion deal proposal by Telstra and TPG to share networks and spectrum was rejected by competition authorities. The rejection was based on concerns that the deal would further entrench Telstra’s dominance in the telecommunications sector. Instead, TPG opted to pursue a partnership with Optus for a different sharing agreement.

Under the new deal, TPG will pay .59 billion in service fees to Optus over an 11-year period to establish a “multi-operator core network.” This investment will accelerate Optus’ 5G network development, allowing them to complete it ahead of schedule. TPG believes that paying Optus fees is a more cost-effective approach compared to building and operating their own network in regional Australia, positioning them to attract more mobile phone users.