Vodafone’s Determined Move to Bridge the Divide: Closing the Gap with Telstra and Optus in the Telecommunications Business

The proposed sale of TPG’s infrastructure business to Vocus, backed by Macquarie, presents two different perspectives, both significant in evaluating the situation. On one hand, it can be viewed as TPG’s acceptance of the failure of its ambitious empire-building strategy. On the other hand, it can be seen as yet another strategic move aimed at narrowing the gap between its mobiles business, Vodafone, and the second-largest player in the telecommunications industry, Optus.

This deal likely encompasses both aspects, but at first sight, it appears to reflect TPG’s shift from its lofty growth aspirations to a more practical need for liquidity. By selling a substantial portion of its business, including enterprise, government, and wholesale infrastructure assets, for $6.3 billion, TPG addresses its immediate financial requirements.

Regardless of the interpretation, TPG, the owner of the third-largest player in the mobiles market, Vodafone, is experiencing a reduction in size.

While Telstra remains the unchallenged market leader, Vodafone aspires to attain the position of the second-largest player, currently held by Optus.

It’s essential to recall that the merger between Vodafone, a mobile operator, and TPG, a broadband and infrastructure group, gave rise to the present-day TPG only three years ago. Despite being named TPG in the listed company, its largest shareholder is a Vodafone joint venture with Hutchison, another international telecommunications giant that struggled to gain a foothold in the Australian market.

This somewhat complex corporate structure evolved from a series of corporate transactions since the early 2000s, stemming from Vodafone’s efforts to establish a prominent presence in the Australian market.

Inaki Berroeta, the CEO of TPG and a former Vodafone employee who retained the top position after the merger, appears to embody Samuel Beckett’s mantra of “Try Again, Fail Again, Fail Better.”

Based on the limited information provided by TPG to the market, the latest deal seems to signify a demerger or unwinding of the Vodafone merger that occurred in 2020.

Initially, the merger aimed to create an integrated telecommunications company, but the resulting entity also faced significant debt burdens, which hindered its ability to invest in the mobile business.