TPG Offloads Fiber Assets to Vocus for $5.3 Billion

Following a previously failed bid of $6.3 billion last year, TPG has reached an agreement to sell its fiber and fixed network infrastructure assets to Vocus for $5.25 billion. This significant deal encompasses TPG’s enterprise, government, and wholesale businesses, including its residential fixed access unit, Vision Network, as well as its submarine business.

As part of the transaction, approximately 560 employees from TPG will transition to Vocus. The deal is set to be completed in the second half of FY25, and under its terms, TPG will purchase fixed network services from Vocus at an annual fee of $130 million. The initial attempt by Vocus to acquire TPG’s infrastructure assets in August 2023 did not materialize due to challenges in navigating the complexities of the deal and reaching agreeable commercial terms.

This new agreement involves TPG selling a more streamlined asset portfolio, leading to what TPG CEO Iñaki Berroeta describes as a simpler operating model compared to the original discussions. Berroeta stated in an ASX announcement that this deal unlocks the value of TPG’s fixed infrastructure assets while bolstering its financial position and allowing for a more focused business structure.

Post-transaction, TPG will retain its consumer and enterprise, government and wholesale mobile businesses, as well as its consumer and small office/home office fixed retail operations, including fixed wireless services. The sale is projected to generate a net cash value of approximately $4.6 billion to $4.7 billion, which TPG plans to utilize for future capital management and investment initiatives, although specifics on these future plans are yet to be determined. TPG expects to provide additional details to shareholders around the time of the transaction’s completion.

Upon finalizing the sale, TPG and Vocus will establish a partnership under the Transmission and Wholesale Fibre Access Agreement (TAWFA), which will have an initial term of 15 years with two optional 10-year extensions. This agreement ensures that TPG retains the “owner economics” of the fiber network, with pricing structured to be non-volumetric and subject only to indexed and capped inflation, along with costs for new infrastructure deployment.

Before the deal concludes, TPG will undergo an internal restructure to transfer all transaction-related assets into a subsidiary, which will then be sold to Vocus. Both the sale and the restructuring are pending regulatory approval.

For Vocus, the acquisition represents a substantial opportunity to enhance its presence in Australia's telecommunications market. The deal will expand Vocus's metropolitan fiber footprint by more than tripling it to 32,000 km and nearly doubling its nationwide fiber network to a total of 51,000 km. Furthermore, the acquisition will increase its connected buildings to 20,000 and double its submarine cable footprint to 14,700 km, including gaining access to TPG's route from Sydney to Guam.

Jarrod Nink, the interim CEO of Vocus, emphasized the transformative impact of the agreement, highlighting its significance in promoting a more competitive telecommunications landscape in Australia. He stated that the acquisition positions Vocus to enhance its service offerings and better meet the needs of its customers in an increasingly dynamic market. Nink's comments reflect Vocus's commitment to leveraging the expanded network capabilities to drive growth and innovation within the industry.