TPG mobile launch plans – there’s going to be data on the streets
With an increasingly commoditised fixed market, the Australian mobile market is under attack as both margins and market share are under pressure.
TPG is set to launch its mobile network with rock bottom introductory pricing for mobile data.
TPG has announced its intention to launch its mobile network in Q3-Q4 2018 with unlimited data inclusions, 6 months free access and a monthly fee of just A$9.99.
There are some limitations to the plan: 1) its mobile data only, so no voice and text, 2) 1GB data limit per day after which the speed drops to 1Mbps, and 3) initial coverage limited to few suburbs in metros.
In anticipation of TPG’s launch, Telstra, Optus and Vodafone have recently introduced unlimited data plans but at much higher prices and with unlimited voice and text.
The A$18bn Australian mobile market is on the verge of a major shakeup as TPG takes a leaf out of the Reliance Jio playbook. India’s Reliance Jio had a similar pricing strategy at launch and has amassed more than 15% market share within two years of launch.
We expect a new phase of consolidation in the mobile market as some MVNOs may find it financially unviable to operate at the lower end of the market at these prices.
In line with our recent market reports, TPG’s aggressive move on mobile data pricing could accelerate the adoption of fixed wireless as low to moderate usage users move to mobile only.
TPG launches its mobile plans
TPG sent shockwaves through the A$18bn Australian Mobile market last year when it announced that it would launch its own mobile network in Australia by the middle of 2018. It has spent the majority of the last year building out its network with its rollout strategy focusing on deploying a dense small cell network across key metros complimented by a traditional macro network. On 9th May 2018, TPG announced trial mobile plans that will be available once its network comes online in the third or fourth quarter of CY2018. In this flash report, we take a look at TPG’s launch pricing, compare with it what’s available through the incumbents and analyse the impact on the Australian mobile market and the NBN.
TPG’s launch plans
TPG has just announced its intention to launch its mobile plans in Q3-Q4 of 2018, with "unlimited" data inclusions and a monthly fee of just A$9.99. Going one step further and to presumably attract as many customers as possible, it will also offer its initial trial plans free to customers for an initial 6 month period. However, there are some limitations to the plans – TPG classifies these plans as mobile data service plans which means that users will not be able to make/receive calls and text messages. In addition, each day you get 1GB of data, after which the speeds drop to 1Mbps which means that users will get a maximum of 30GB per month at 4G speeds.
The incumbents – Telstra, Optus and Vodafone, in anticipation of a disruptive move by TPG have recently launched their own version of ‘Unlimited’ data plans. But clearly none of those plans can match the rock bottom pricing of A$9.99 a month by TPG. Below we have highlighted some of the differences between the unlimited offerings in the market.
Figure 1. Unlimited data plans – TPG, Telstra and Vodafone
SOURCE: Venture Insights, TPG, Telstra and Vodafone
TPG’s Executive Chairman, David Teoh said in a statement that "the TPG team has been working hard constructing our own network and I feel proud and excited to be introducing our very first on-net mobile product offering. We are inviting users to register to experience our coverage and network performance as well as to take advantage of unlimited mobile data for free. This promotion is the first of its kind in Australia and signals a new era of competition in the mobile market and will undoubtedly bring great benefit to Australian consumers".
We also note that TPG has described the launch plans as a ‘trial’ which means that it could change the speeds, data inclusions and pricing before it launches on a wider scale. TPG has also set-up a pre-registration website where users can register an expression of interest. In addition, TPG will also be prioritising existing TPG, iiNet and Internode broadband customers when it begins to allocate mobile SIMs.
Limited coverage at first
TPG has also announced the areas in which it expects to provide mobile network coverage in the initial stages. Most of the network coverage is concentrated around the CBD areas in Sydney, Melbourne, Brisbane, Adelaide and Canberra. We note that the initial list of suburbs indicates a very limited coverage area at launch and TPG has not made it clear as to what will happen when users leave the coverage area – will users lose coverage or has TPG signed a roaming deal with any of the incumbents. However, TPG is clearly starting the marketing machine and there will be a much wider list of pre-registration customers which it can approach as the network coverage grows. Below is the list of initial coverage areas.
Figure 2. Initial list of coverage areas for TPG’s mobile network
SOURCE: Venture Insights, TPG
TPG following in the footsteps of India’s Reliance Jio
Back in November 2017, we believed TPG, a telco with a reputation for price leadership in fixed broadband will adopt a disruptive approach and expect mobile ARPUs to be under pressure as it looks to gain market share through aggressive pricing and higher data limits. See our report – Disruptive Mobile Business Models – Is TPG going to be Free?
We note that TPG is following in the footsteps of India’s Reliance Jio which had a similar pricing strategy at launch and even today offers unlimited data plans including unlimited voice and limited text at starting prices that are as low as A$3 per 28 days validity in prepaid and as little as A$6 per month in postpaid.
The launch of Reliance Jio has led to a major shake-up of the Indian Telco market with Vodafone India, the 2nd largest MNO by subscribers merging with the third largest MNO, and Aircel, run by Malaysia’s Maxis Telecom, filing for bankruptcy. Reliance Jio was also the fastest telco operator in the world to reach the 50mn subscriber mark within just 83 days of launch and today has more than 185mn subscribers in India. This translates into a market share well north of 15% in less than two years since launch. We believe TPG’s approach will lead to a similar shakeup in Australian Mobile market and we expect all incumbents to lose some market share to TPG as a majority of subscribers in the value end of the market will be attracted to TPG’s pricing. We also believe that TPG’s aggressive pricing strategies could make operating at the lower end of the market financially unviable for some of the smaller MVNOs which could lead to a new phase of consolidation in the Australian telco market. We presented a couple of scenarios of TPG’s mobile entry on the Australian Telco market at a recent Telco sector breakfast roundtable. See a roundup of the event and the scenarios that were presented - Telco Roundtable Breakfast – key findings.
Will TPG’s move impact the NBN and accelerate the adoption of Fixed Wireless?
Our recent survey on Fixed-to-wireless substitution indicates that 30% of existing fixed broadband users are at risk of switching to wireless. We believe TPG’s rock bottom pricing on mobile data will entice users at the ‘value’ end (low to moderate data usage) of the market to consider switching towards mobile only data. Whilst early days, we expect TPG to push into the fixed wireless broadband segment which will impact the number of potential subscribers that could sign up for the NBN’s fixed line.
Even before TPG’s announcement, there was a range of activity in the market as Telcos position themselves for the launch of 5G networks and fixed wireless broadband solutions. These activities, combined with the upcoming launch of 5G networks will further increase consumer interest and options for wireless broadband services. We believe TPG’s launch will only force the incumbents hand to be more aggressive in the mobile broadband space. All three incumbents have recently launched unlimited data plans with both Optus and Telstra announcing that they intend to launch 5G enabled fixed wireless services in the first half of 2019. Internationally, Spark in New Zealand has begun pushing its LTE fixed wireless service to avoid Chorus’ wholesale charges and in the US, both Verizon and AT&T, two of the largest MNOs are planning on launching a 5G fixed wireless broadband product by the end of 2018.