Some sense returned to the telco sector yesterday after the headless chicken sell down of stock in the wake of TPG’s move before Easter to buy new spectrum and build the country’s 4th mobile phone network at a total cost of close to $2 billion.
Shares in Telstra and Vocus were smashed by nervy investors who then turned on TPG when its shares re-listed on Tuesday after a trading halt to allow it to raise close to $400 million from shareholders.
That saw a spate of headlines and excited commentary about how TPG had lost $1 billion in value which ignored the value of the extra equity acquired as well as more than $1.3 billion worth of spectrum.
In any case TPG shares closed Tuesday above the $5.25 issue price which was a positive sign ignored by most investors.
Yesterday TPG shares jumped 7.1% to $5.89, well above the issue price and a further sign of investors confidence.
Shares in Vocus jumped 10.3% to $3.42, while Telstra shares rose more than 3% to $4.13. That was the first rise since April 11 when the shares closed at $4.58.
The founder and chief executive of an independent telco told Business Insider yesterday that TPG’s move deeper into mobile in Australia would hit Vodafone harder than Telstra.
Inabox chief executive Damian Kay said investor anxiety seems to be targeted at the wrong telco (Fairfax Media papers had led the way in singling out Telstra).
“Everyone’s looking at Telstra’s share price but I think the real story is how this will affect Vodafone," Kay was quoted.
He said he was “not convinced that Australia is large enough for four players in the mobile market.”
Telstra is the dominant player in the Australian mobile network market with 17.4 million subscribers. Optus has about 8.4 million, with Vodafone has 5.6 million.
Smaller companies like Amaysim and Inabox buy access from one of those networks and on-sell them. TPG is now selling mobile plans using wholesale coverage provided by Vodafone.
Kay is convinced that, as the clear number three in the market, Vodafone will suffer greatly from TPG’s entry. “I think this will have a serious impact on Vodafone, and I wouldn’t be surprised if Vodafone ends up selling to TPG," he told Business Insider.
"In fact, maybe that’s actually the plan."
