SHAREHOLDERS NOT HAPPY WITH TPG, SHARE PRICE TAKES A BEATING

SHAREHOLDERS NOT HAPPY WITH TPG, SHARE PRICE TAKES A BEATING

After last week's announcement that TPG Telecom (ASX:TPM) had purchased a government contract to build Australia's fourth mobile network, the company's shares have been dumped by investors, wiping a billion dollars off its market value.

TPG paid $1.26 billion on the government contract for a high-quality chunk of the Australia's 4G mobile spectrum, and will spend a further $600 million on building their own mobile network.

The company entered a trading halt last Wednesday prior to the announcement and resumed trade on Tuesday morning.

At around 3pm Tuesday (AEST) TPG shares crashed 18 per cent, down to $5.41, suggesting shareholders are not too confident in the telco's ability to pull off the network.

The drop in share price follows TPG's attempt to tap shareholders for the $400 million required to complete the new network.

After TPG announced the purchase of the new network last week, Telstra's (ASX:TLS) shares dropped six per cent.

Currently, Telstra's share price is down 3.6 per cent to $4.01.

TPG's sharp decline implies that shareholders are not sure that its new network, which promises low prices and the utilisation of its fibre optic infrastructure, can compete with its rivals Telstra, Vodafone, and Optus.

Further uncertainty may be the result of an upcoming ACCC decision to force network providers to give consumers free access to the network, meaning the only distinguishing feature of each provider will be the price point.

If the domestic roaming regulations are put in place by the ACCC, Telstra is set to potentially lose $546 million.

TPG's network will take approximately three years to complete, and will cover 80 per cent of the Australian market.

Analysts have suggested that shareholders are spooked by the excessive price the telco paid for the network, as well as a lack of confidence that the implementation will ultimately be profitable.

Business News Australia

Enjoyed this article?

Don't miss out on the knowledge and insights to be gained from our daily news and features.

Subscribe today to unlock unlimited access to in-depth business coverage, expert analysis, and exclusive content across all devices.

Support independent journalism and stay informed with stories that matter to you.

Subscribe now and get 50% off your first year!

Four time-saving tips for automating your investment portfolio
Partner Content
In today's fast-paced investment landscape, time is a valuable commodity. Fortunately, w...
Etoro
Advertisement

Related Stories

Cyber security consultancy CSO Group to merge with AI enabler xAmplify

Cyber security consultancy CSO Group to merge with AI enabler xAmplify

Sydney-based cyber security consultancy CSO Group is set to join fo...

From Just Jeans to Dotti, Myer proposes merger with Premier's apparel brands

From Just Jeans to Dotti, Myer proposes merger with Premier's apparel brands

Myer's (ASX: MYR) new executive chair Olivia Wirth has wasted l...

REA Group buys full stake in end-to-end property sales interface Realtair

REA Group buys full stake in end-to-end property sales interface Realtair

Realestate.com.au operator REA Group (ASX: REA) has acquired the re...

ACCC lists competition concerns over $8.8b merger between Sigma and Chemist Warehouse

ACCC lists competition concerns over $8.8b merger between Sigma and Chemist Warehouse

The proposed $8.8 billion merger between Sigma Healthcare (ASX: SIG...