Vocus Acquires TPG’s Fiber Assets for $5.3 Billion

TPG has reached an agreement to sell its fiber and fixed network infrastructure assets to Vocus for $5.25 billion, following a failed bid of $6.3 billion last year. This deal encompasses TPG’s enterprise, government, and wholesale business segments, along with its residential fixed access unit, Vision Network, and its submarine business. As part of the transaction, 560 TPG employees will transition to Vocus.

Scheduled for completion in the second half of FY25, the agreement stipulates that TPG will pay Vocus an annual fee of $130 million for fixed network services. The earlier negotiations, which took place in August 2023, fell apart due to challenges in navigating the deal's complexities and reaching commercial terms. This time around, TPG has opted to sell a smaller asset perimeter, leading to a simplified operating model, as highlighted by TPG CEO Iñaki Berroeta.

In a statement to the Australian Securities Exchange (ASX), Berroeta emphasized that the deal will unlock value from TPG's fixed infrastructure assets, enhance its financial position, and facilitate a more focused business strategy with increased flexibility for optimizing its capital structure. Following the sale, TPG will retain its consumer and enterprise mobile operations, government and wholesale services, and its consumer and small office/home office fixed retail business, which includes fixed wireless offerings.

The net cash value from the sale is expected to range between $4.6 billion and $4.7 billion, which TPG plans to allocate toward future capital management and investment initiatives. However, specifics regarding these future plans have not yet been finalized and will be disclosed closer to the transaction's completion.

Post-sale, TPG and Vocus will collaborate under a transmission and wholesale fiber access agreement (TAWFA) with an initial term of 15 years, along with two optional 10-year extensions at TPG’s discretion. The agreement will entail an annual cost of $130 million. TPG has structured the TAWFA to maintain "owner economics" of the fiber network, ensuring that pricing is tied to inflation and network expansion without being volume-dependent.

To facilitate the transaction, TPG plans to undergo an internal restructuring to move all related assets into a subsidiary prior to the sale to Vocus. Both the sale and restructuring will require regulatory approval.

For Vocus, this acquisition represents a significant enhancement to its operational capabilities, especially in metropolitan areas. The deal is set to triple its metropolitan fiber footprint to 32,000 kilometers and nearly double its nationwide fiber network to a total of 51,000 kilometers. Additionally, Vocus will see its connected buildings increase to 20,000 and its submarine cable network expand to 14,700 kilometers, including a crucial route from Sydney to Guam.

Interim CEO of Vocus, Jarrod Nink, emphasized that the agreement with TPG represents a transformative milestone for the company, marking a significant advancement in its strategy to enhance its market position. He described the acquisition as a vital step toward cultivating a more competitive telecommunications landscape in Australia. By gaining access to TPG’s extensive fiber and fixed network infrastructure, Vocus is poised to improve its customer service capabilities and expand its range of service offerings. This move not only strengthens Vocus's operational footprint but also enhances its ability to meet the growing demands of customers in an increasingly dynamic and competitive market. With the added capacity and resources, Vocus aims to innovate and adapt, ensuring it remains a key player in the evolving telecommunications sector.