TPG's new mobile network won't allow you to make traditional voice calls

iStock

When David Teoh’s TPG Telecom launches its highly anticipated mobile network later this year it will launch with one unique feature; customers won’t be able to make a traditional voice call.

Calls will only be able to be made over internet protocol (IP), using applications like Whatapp, Facebook Messenger calls and Viber.

Traditional voice calls made over mobile networks,via Voice over Long-Term Evolution (VoLTE) will be available later, as the network is rolled out, but will not be available at launch. Instead, plans will be data only.

It’s a bold, if not unusual, move for a mobile network operator. But, it partially explains how TPG will be able to deliver a new network for $600 million, with much less spectrum than its rivals, using fewer base stations and small cell technology.

“We’ve decided to go to data in the beginning,” TPG chief operating officer Craig Levy told The Australian Financial Review.

Mr Levy said voice calls will definitely come to TPG’s mobile network in time. The progressive rollout of TPG’s mobile network is something which doesn’t appear to have been understood by the market as yet.

The news will, at least temporarily, give Telstra shareholders some cause for optimism. Australia’s largest telco warned falling mobile average revenue per user and poor NBN margins would hit its earnings last week. Nonetheless Telstra remains under immense pressure to deliver a long-term strategy to counter these trends and fend off rivals such as Vodafone and Optus, which had its best year in mobiles in seven years.

$9.99 a month plan

TPG will launch later this year with $0 unlimited data plan for the first half year, then $9.99 each month from then on.

“When you look in Australia, the size of the mobile market is massive. In our business plan, we look at as modest share we can aim for, and with that type of pricing, we feel we can do well. If you look at the track record of TPG, our financial discipline is one of our key ingredients,” Mr Levy said.

“We wouldn’t be going down the path we are, if that didn’t make financial sense. This is the first product… it also means down the line, we’ve got other things planned.”

TPG is building its mobile network close where its existing fixed-line customer base lives, works and commutes.

Operating as a mobile data offering in the beginning TPG’s mobile network could work as an NBN bypass for price conscious customers in the areas where the telco is building up.

“When you look at the offer we’ve put together, it gives us an opportunity to fine tune the network along the way, get a lot of feedback from the people who are using in free of charge…that’s why the free period needs to be a win-win for the company and our customers,” Mr Levy said.

NBN upended TPG’s consumer internet business, along with the rest of the sector. It was paying roughly $16 wholesale to rent lines from Telstra to offer ADSL, whereas under NBN, the government-owned business is targeting $52 whole average revenue per user, leaving little room for retail service providers, such as TPG to make money.

A new regional broadband scheme also sees TPG levied with a charge of $7.09 per user per month on its fibre-to-the-basement network, which is in direct competition with the NBN.

TPG will, in time, build out its mobile network and begin offering voice services. Mr Levy also flagged TPG is planning to enter regional areas.

Technology questioned

There is scepticism around TPG’s use of small cell technology, which, true to its name, is much smaller, and cheaper, than traditional macro base stations. Telstra, Optus and Vodafone have large amounts of macro base stations, which have much larger coverage areas, meaning they do not need to build as many, although they are more expensive on a site-by-site basis.

Last year, TPG paid $1.26 billion for an 11-year licence to use 2×10 megahertz of 700 MHz mobile spectrum – an Australian record price for spectrum.

Mr Levy defended the use of the technology and TPG has actually increased its focus on small cells, reducing the amount of macro sites it had originally planned. He argues TPG’s plan is to leverage is enviable fibre assets, including those it acquired from PIPE Networks, AAPT, as well as its own fibre-to-the-basement network and dark fibre network it built for Vodafone.

Mr Levy says taking much of the processing from its small cell sites to a centralised point, via its fibre networks, allow TPG to minimise the amount of equipment it needs on each site, versus a traditional macro site which processes on site.

“Our network itself has been designed so we are using cloud-RAN architecture, so we’re moving towards a centralised processing approach. That mean the footprint we deploy on a pole is significantly reduce and very different to a legacy operator. Effectively what we’ve done, we have removed the intelligent processing layer away from the pole and we’ve moved more towards centralising the intelligence,” he said.

“This will effectively mean a smaller footprint on poles, we’ve catered to a 5G upgraded path where we can make changes to the radio, but the actual real estate on the pole, and most importantly the backhaul and the centralised intelligence, we’re taking steps today for the future.”

This article was originally published by the Australian Financial Review. Read the original here, or follow the AFR on Facebook.

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.