TPG weighs sale of wholesale broadband unit

Australia's TPG Telecom is weighing a spin-off of its wholesale broadband business, reflecting robust investor demand for local telecom assets.

The No.3 Australian telco announced Tuesday that it has appointed Bank of America Securities to carry out a "strategic review" of its Vision Network unit. The company said it was focused on "unlocking value for TPG Telecom shareholders and enabling Vision Network to exploit its full potential as Australia's largest non-NBN residential wholesale access network."

Vision Network passes 410,000 premises, mostly in big cities, delivering fixed-line broadband to approximately 135,000 subscribers.

Figure 1: TPG's Vision Network could fetch up to A$935 million ($598 million), followed by a monster sale of Telstra InfraCo next year.
(Source: ZUMA Press, Inc./Alamy Stock Photo)

Like the NBN, Vision uses a mix of broadband technologies, including fiber to the node, premises and building (FTTN, FTTP, FTTB) and hybrid fiber coaxial (HFC) connections. The company said it was the first Australian wholesale to adopt G.Fast, the latest DSL technology.

The Vision business is expected to top $100 million Australian dollars (US$64.5 million) of pro forma revenue in the current financial year, TPG said.

TPG wholesale executive Jonathan Rutherford told Australian Financial Review that the company aimed to complete the review by March.

"There have been lots of strong inbound interest and lots of parties that like to talk to us about the different assets and networks," he said.

He said digital infrastructure was a "really hot" asset class, driven by continued housing and population growth, and was "attracting strong investment and multiples."

UBS has estimated that Vision Networks would likely be valued between A$550 million ($352 million) and A$935 million ($598 million).

Telstra likely to sell InfraCo stake

In the past 18 months Telstra, Optus, TPG and the two major New Zealand operators have all sold off stakes in their mobile tower businesses to funds or private equity firms.

Having just completed its restructure into a holding company and three operating subsidiaries, Telstra is expected to follow TPG in shopping its larger fixed-line business to the investment community. In the revamped line-up, the InfraCo unit owns Telstra's passive network assets including 250,000 kilometers of fiber, two data centers, 360,000 kilometers of ducts and 5,000 exchanges.

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JPMorgan analysts have estimated that the sale of 49% of the business could fetch between A$12 billion ($7.67 billion) and A$17 billion ($10.9 billion). They believe that Telstra will seek to complete the sell-off before the end of the financial year next June 30.

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— Robert Clark, contributing editor, special to Light Reading