TPG Telecom is building its own $1.9 billion mobile network

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Billionaire David Teoh’s TPG Telecom is creating its own mobile phone network after winning a bid for spectrum in the 700MHz band at an auction by the Australian Communications and Media Authority.

The plan for Australia’s fourth mobile carrier will cost about $1.9 billion, made up of $600 million for the network rollout capital over three years and $1.26 billion for the 700 MHz spectrum.

The project will be funded through a combination of cash flow and new debt.

TPG today also announced an equity raising of $400 million at $5.25 a share. The shares last traded at $6.66.

“This acquisition of 700MHz spectrum in Australia is a tremendous development for the long-term future of TPG,” says Teoh, the chairman of TPG.

“We are uniquely positioned to leverage our success in the Australian fixed-line broadband market to drive the next phase of growth for TPG’s shareholders and bring new competition to the Australian mobile market.

“We believe that our mobile strategy will be complementary to our ongoing fixed line business, with the ability to bundle mobile and fixed services expected to have a beneficial effect on our already low fixed services customer churn.”

700MHz spectrum is considered premium for mobile networks and means fewer towers are needed to cover larger distances.

“This is a significant investment for the group but one that I expect to be fantastic for our long-term outlook,” says Teoh.

“TPG has had great success over a number of years growing its business and delivering value leading fixed telecommunications services to Australian consumers.”

The company reaffirmed the guidance for full year underlying EBITDA (earnings before interest, tax, depreciation and amortisation) to be in the range of $820 million to 830 million.