Vocus to buy TPG's fibre network assets for $5.3bn

TPG has agreed to sell its fibre and fixed network infrastructure assets to Vocus for $5.25 billion.

The deal includes TPG’s enterprise, government and wholesale business, including its residential fixed access unit Vision Network, and its submarine business.

As part of the agreement, 560 TPG employees will shift to Vocus.

Under the terms of the deal, which is earmarked for completion in FY25’s second half, TPG will buy fixed network services from Vocus for an annual fee of $130 million.

Vocus originally offered $6.3 billion for TPG’s infrastructure assets in August 2023, but the deal fell through shortly after due to both sides failing to navigate the “complexity” of the deal or agree to commercial terms.

This time, TPG has agreed to sell “a smaller asset perimeter... resulting in a simpler operating model than was envisaged in the original discussions,” according to TPG CEO Iñaki Berroeta.

In a statement to the ASX, Berroeta added: “The deal unlocks the value of our fixed infrastructure assets while strengthening our financial position and creating a more focused and streamlined business with significant optionality for the optimisation of our capital structure.”

TPG will now retain its consumer and enterprise, government and wholesale mobile business, as well as its consumer and small office/home office fixed retail business, including fixed wireless.

The deal will deliver a net cash value of around $4.6 billion to $4.7 billion, with which the telco said it will use to “support future capital management and business investment initiatives”.

“Details of such future initiatives have not yet been determined and remain subject to development. TPG anticipates providing more detail to the market around the time of transaction completion,” TPG told shareholders.

'Owner economics'

Following the sale, TPG and Vocus will partner under what’s known as the transmission and wholesale fibre access agreement (TAWFA).

The TAWFA has an initial 15-year term with two 10-year extensions at TPG’s choice, at a cost of $130 million annually.

According to TPG, the TAWFA has been designed to ensure TPG maintains “owner economics” of the fibre network, meaning “pricing is non-volumetric and increased only in relation to indexed and capped inflation and network expansion requiring the deployment of new physical infrastructure”.

Shortly before the completion of the deal, TPG will carry out an internal restructure to transfer all Transaction assets into a subsidiary which will be sold to Vocus.

Both the deal and the restructure are subject to regulatory approval.

Double the fibre network

For Vocus, the key gain will be its access to Australia's cities, with its metropolitan fibre footprint more than tripling to 32,000km. Nationwide, Vocus' fibre network will almost double to a total of 51,000km 

The deal more than triples its number of connected buildings to 20,000.

Vocus will also double its submarine cable footprint to 14,700km and gain TPG's route from Sydney to Guam.

“This agreement is transformative for Vocus and is an important step towards creating a more competitive landscape for the Australian telecommunications industry," said Vocus interim CEO Jarrod Nink.