​Why TPG left Optus for Vodafone

Can Vodafone's network handle 320,000 more users?

An ambitious, billion dollar partnership is underway between TPG and Vodafone, where Vodafone’s network will migrate TPG’s subscriber base in exchange for optical fibre infrastructure to be serviced by TPG.

Vodafone’s experience migrating customers onto its network reads like a bad report card. Customers of 3 Mobile were migrated to its network after the two telcos merged in 2009.

Parts of Vodafone’s network infrastructure was as old as fifteen years. The network strained under the load with its customers enduring frequently disconnected calls and slow Internet speeds. Unsavoury experiences led to a mass exodus of more than a million customers and birthed a dark period in the network’s history known as “Vodafail”.

Upgrades exceeding $3 billion have since been made to Vodafone’s network. The extensive changes inspire confidence in the network’s abilities, said Craig Levy, chief operating officer at TPG Telecom.

“We’re confident in Vodafone’s 4G core network infrastructure. We took a number of steps to make sure the Vodafone network is in top shape before we committed our customer base to it. That network has a lot of headroom for expansion.”

Migrating TPG’s customer base to the Vodafone network is one part of a larger plan. The other involves TPG expanding Vodafone's optical fibre infrastructure at a cost of $300-to-$400 million.

“There’s two parts of this deal. We as TPG Telecom are selling Vodafone [access to] dark fibre. We’re putting in the infrastructure to carry the traffic,” Levy said during an interview with PCWorld.

‘Dark fibre’ refers to unused optical fibre infrastructure. It will make it possible to manage a high volume of data transfers at a lower cost to Vodafone.

Existing TPG customers have been roaming on Optus’ network since the company was founded in 2008. A number of factors led to TPG reevaluating its partnership with Optus, including mandates to soften its plans and a dated billing system.

“Two years ago we had taken our base from 220,000 to 360,000 [customers]. Those plans were taken away from TPG as part of a change under [former Optus chief] Kevin Russell.

“Our plans were not as attractive as they used to be. It forced us to increase the prices on legacy customers.”

Forcing TPG’s hand led to a decline in its customer base. Today it has 40,000 fewer customers at 320,000.

Plan pricing should be cheaper for its customers following the migration, said Levy.

“We’ve been dealing with delayed call records [at Optus]. We’re not passing on the delayed usage to our customers because you can only charge them for the prepaid amount they’ve committed to. If they did exceed their [committed] usage, as a company, we had to swallow those costs.

“Vodafone allows us to understand our cost of sale. The new system is a real time prepaid intelligent network sitting on the Vodafone network.”

More than a year went into finding and negotiating terms with a new MVNO partner. TPG considered Telstra Wholesale before settling on Vodafone Hutchison Australia.

Vodafone and TPG announced the two commercial deals exceed a billion dollars. Levy declined to break out the value of the MVNO partnership.

Existing TPG customers can choose to migrate across to Vodafone or sign up with another carrier altogether.

“We’re going to be inviting our mobile base. We’re going to give them a bonus period that lets them get a welcome pack and try the network without paying for it. Their access plan will come for free for a period, if it's an included value plan.

“If customers take the new offer from us and they're not happy, they can choose another alternative.”

The migration process will be handled by TPG directly and will be a process spanning “a number of months”.

“We have to do it in stages because the industry has porting limitations. We will invite customers in batches. We don’t want to melt our call centre.”

“We plan to handle the mobile experience directly with our customers in terms of doing those batches.”

Vodafone covers more than 96 per cent of metropolitan Australia with its 4G network. It is among the first to adopt virtualised infrastructure and the telco is the first in Australia to offer high definition voice calls over a 4G network. The core of its network supports Cat6 LTE, which has a theoretical maximum download speed of 150Mbps.

“One of the key things for choosing Vodafone was 4G. 4G was very important,” said Levy.

Read more: Optus fined $51k for duping customers on Internet speeds

Further future proofing is underway following its partnership with TPG. The extension of dark fibre infrastructure to 3,000 Vodafone cell sites across Australia will prep the network for future technologies.

Construction will take three years to complete in 2018 and it is estimated the network will be 5G ready by 2021, timed for an influx of Internet of Things devices and the emergence of virtual reality technologies.

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