Vodafone Hutchison Australia Pty Limited v Australian Competition and Consumer Commission

Vodafone Hutchison Australia Pty Limited v Australian Competition and Consumer Commission - [2020] FCA 117 - FCA 2020 case summary — Zoe

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REASONS FOR JUDGMENT INTRODUCTION [1] Background [1] Overview [9] RELEVANT LEGAL PRINCIPLES [35] Introduction [35] 'Market' [40] 'Substantially lessening competition' [48] 'Likely to have the effect' [52] What amounts to a 'substantial lessening of competition'? [70] CHRONOLOGY OF EVENTS [73] WITNESSES [74] SUMMARY OF THE RETAIL MOBILE MARKET [81] Characteristics of mobile networks in Australia [83] Significance of network coverage and capacity [88] Participants in the retail mobile market [97] Vodafone [97] TPG [103] Telstra [108] Optus [117] Coverage and capacity of the three MNOs [123] MVNOs [125] Segmentation and revealed preferences in the retail mobile market [127] Market shares (current and historical) [128] Types of mobile services offered (pre-paid and post-paid) [129] Price competition [137] Introduction [137] Pre-paid segment [141] Post-paid segment [144] Competition through inclusions [152] SPECIFIC CHARACTERISTICS OF THE RETAIL MOBILE MARKET [157] The MNOs and their networks [158] The competitive advantage conferred by the ability to bundle, particularly in the business segment [164] Vodafone's competitive position relative to Telstra and Optus due to Vodafail [167] The competitive position of the MVNOs and TPG in the retail mobile market [170] The key drivers of competition in the retail mobile market [173] Price and data inclusions [173] Network coverage [175] Network quality [181] Data traffic growth and its impact on competition during the next five years [182] Trends in ARPUs and data inclusions on mobile phone product [184] THE FUTURE WITHOUT THE MERGER [192] ACCC submissions [193] In relation to TPG [194] In relation to Vodafone [211] Consideration [214] TPG's current position and the next five years without the merger [215] A 'two pole solution' is unacceptable [335] TPG system is unique [340] Mr Teoh [351] Whether TPG could fund a second attempt at network roll-out [407] Funding through free cash flow [417] Funding a roll-out with debt [431] Whether a roll-out could be funded with equity [447] TPG will monetise its spectrum [471] Other matters affecting the likelihood of TPG rolling out a mobile network [487] The ability of TPG to obtain a roaming agreement on commercial terms [487] Thick MVNO versus network sharing [508] There would be difficulties and delay involved in the network build [513] THE FUTURE WITHOUT THE MERGER IF TPG DOES ENTER AS AN MNO [526] TPG [527] Vodafone [588] The submissions of the ACCC [588] Consideration of the position of Vodafone [662] THE FUTURE WITH THE MERGER [713] The submissions of the ACCC [713] The submissions of the merger parties [773] Consideration of competing positions [778] Network capacity and quality [792] Improved ability to fund investment in better network quality [829] Improved balance sheet [829] Ability to access debt/equity funding [837] Cost synergies [840] Financial benefits from economies of scale [844] MergeCo will roll-out 5G faster than Vodafone on a standalone basis [854] MergeCo will constrain Telstra and Optus [860] CONCLUSION [899]

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Background 1 The Applicant ('Vodafone', sometimes referred to as 'VHA') wishes to acquire all of the ordinary shares in the Second Respondent ('TPG') by means of a scheme of arrangement under Pt 5.1 of the Corporations Act 2001 (Cth). This would be implemented pursuant to a scheme implementation deed dated 30 August 2018 ('Scheme Implementation Deed'). 2 It is a condition precedent to completion of the Scheme Implementation Deed that TPG and Vodafone have obtained informal merger clearance from the First Respondent ('ACCC'). On 8 May 2019, the ACCC announced that it declined to give informal merger clearance on the expressed basis that the merger would be likely to have the effect of substantially lessening competition in the supply of retail mobile services in Australia, in contravention of s 50 of the Competition and Consumer Act 2010 (Cth) ('CCA'). 3 By these proceedings, Vodafone seeks declaratory relief that the merger will not contravene s 50 of the CCA. 4 The Court has come to the view that the proposed merger would not have the effect, nor be likely to have the effect, of substantially lessening competition in the supply of retail mobile services in Australia. Accordingly, the declaratory relief sought by Vodafone will be granted so the merger can proceed as contemplated by the Scheme Implementation Deed. 5 The ACCC contended that the future state of competition without the merger is one where it is likely or there is a real chance that TPG will roll-out a mobile network, and will focus primarily on winning new customers through its aggressive pricing. In this way, TPG's competitive constraint would prompt Vodafone, in particular, to respond by adjusting its prices, and the response of Vodafone would, in turn, lead to a competitive response by Optus and Telstra. 6 Then, the ACCC contended that with the merger there would be no competitive effect from any new entry. The new merged entity (called 'MergeCo') would not offer any substantially greater competitive constraint than that which Vodafone would offer without the merger. The ACCC contended that competition would not meaningfully be improved and the benefits of a new entry would be lost. 7 According to the ACCC, this comparison of the future state of competition with and without the merger, demonstrates that there is a real chance that the merger will substantially lessen competition by eliminating the prospect of TPG's entry into the retail mobile market in Australia. 8 I have not accepted the above contentions of the ACCC, and have determined that Vodafone has discharged the burden of proof placed upon it to obtain the declaratory relief it sought in these proceedings.

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Overview 9 Back in 2017, there was a moment in the affairs of TPG and Mr Teoh (the guiding force behind TPG) for a business opportunity to be taken to roll-out a retail mobile service. That moment has passed. To now leave TPG and Vodafone in their current state will not promote competition in the retail mobile market. A merger would not now, and would not likely in the relevant future, substantially lessen competition in the supply of retail mobile services in Australia. 10 It is extremely unlikely and there is no real chance that TPG will roll-out a retail mobile network or become an effective competitive fourth mobile network operator ('MNO') in Australia in the relevant future. When I refer to there being no real chance I mean that there is no commercially relevant or meaningful real chance that TPG will roll-out a retail mobile network or become an effective competitive fourth MNO. Then, Vodafone itself is facing, and will face, constraints in trying to compete with Telstra and Optus in the retail mobile market. The rational and business-like solution is for Vodafone and TPG to merge, with the result that both companies will be enhanced and will be a stronger competitive force against Telstra and Optus. 11 The alternative fact scenario in the future (if, as I find, it is extremely unlikely and there is no real chance that TPG will roll-out a retail mobile network) is that any potential for a third MNO to compete with Telstra and Optus will be gone. Then, even if TPG did attempt to enter the market as it did before, Vodafone would be left as it is and TPG would have a lack-lustre presence in the retail mobile market. This would not promote competition in this market. It is not necessarily the number of competitors that are in the relevant market, but the quality of competition that must be assessed. Further, it is not for the ACCC or this Court to engineer a competitive outcome. The only question for this Court is whether the merger would have the effect, or be likely to have the effect, of substantially lessening competition in the supply of retail mobile services in Australia. 12 Whether the earlier decisions of TPG to enter the Australian retail mobile market and then continue in that endeavour were sound, rational and commercial decisions is of historical interest, although of some relevance in these proceedings. Obviously, an analysis of this history will inform present market participants; rational market participants will act upon any lessons they might have gained from the previous TPG roll-out of a mobile network. To misquote Karl Marx, history repeats itself only when you ignore it. I do not imagine Mr Teoh will ignore the history. Mr Teoh will have learnt many lessons from his experience in rolling out a retail mobile network and its aftermath, including the lessons to be learnt as a consequence of these proceedings. 13 However, the true focus in these proceedings, as one part of the analysis, should be on the question of whether there is a likelihood, possibility or real chance (whatever phrase is adopted) that TPG will in the future (relevantly the next five years) roll-out a retail mobile network in the circumstances that can reasonably and sensibly be predicted based upon the evidence before the Court. 14 An important matter to keep in mind when considering individual factors that may impact upon the future likelihood, possibility or real chance of a roll-out by TPG is the cumulative effect of these factors, and how this cumulative effect would impact on the likelihood of making a rational commercial decision to roll-out a retail mobile network. Just because one factor is not 'critical' to achieving a roll-out (but is otherwise undesirable or difficult to implement) does not mean that that factor in conjunction with other factors, may not swing rational decision makers to a particular view against rolling out a retail mobile network. If sufficient factors that may favour a roll-out are either not likely to occur, or to a rational decision maker are undesirable or difficult to implement, this may indicate that a roll-out would be a decision no rational company in the position of TPG would take in the relevant future period. This is not to say that in looking at each factor that may be in favour of, or an impediment to, a roll-out of a retail mobile network, each factor will not need to be assessed in isolation. It is just that it will be necessary to look at the whole picture. 15 Then it must be recalled that the ultimate decision to proceed in the future with a roll-out of a mobile network will be that of TPG. It is abundantly clear that if Mr Teoh does not vote in favour of a roll-out it will not occur. If Mr Teoh votes in favour of a roll-out, then further processes at Board level will need to take place to assess a business plan in light of financial, technical and market conditions (all of which have been fully ventilated and analysed in these proceedings). 16 The assessment of Mr Teoh's views and the reasons he has given for those views as to the future plans of TPG is critical to the Court's assessment in these proceedings. It is always difficult to predict business decisions, which are subjective and depend upon the judgment of the persons making such business decisions. Then there is always the possibility that statements of business intentions made by interested parties or market participants may be made in the course of merger litigation to try and establish a more favourable counterfactual. I appreciate that both TPG and Vodafone before the Court sought to put their 'best foot forward' in support of the merger, and maybe what is put before a Court has a different complexion to that said outside the Court, where a company may seek to build itself up in the marketplace. 17 I have had the opportunity of assessing Mr Teoh as he gave his evidence; of assessing his views and opinions; and of assessing his capabilities and business approach. No attack was made upon his credibility, and none was warranted. Mr Teoh clearly had a tight grasp of the business affairs of TPG. Traditional good board governance would normally require careful documentation of analysis and decision making. Mr Teoh had a more informal and fluid approach, obviously with a capability to absorb and retain commercial information, and make sound commercial decisions. Mr Teoh did not base his decisions on rigorous financial modelling. Mr Teoh certainly portrayed as a market disruptor and as having an unconventional business style. Whilst he may do whatever it takes to progress his business, he is obviously not foolhardy. No one suggested he would act other than in a sound, rational and commercial way in deciding the future of TPG in the next five years (and beyond). 18 It would of course have been open for the Court to have rejected the evidence of Mr Teoh (and other witnesses called by Vodafone and TPG) as to their predictions of the future retail mobile market. This may have meant that the evidence supporting the merger was of little probative value, although normally the fact that a witness is not believed does not prove the opposite of what is asserted. However, this is not the position I have found myself in as I have accepted Mr Teoh's evidence and his reasons for his views. Further, this is not a case where uncorroborated oral evidence is given by just one witness as to the future of the retail mobile market. 19 This leads me to another observation. The very nature of these proceedings, involving the consideration of extensive evidence and the public sworn statements made by personnel of both Vodafone and TPG as to their intentions, must be taken into account in my assessment of the future market. TPG has publicly disclosed in these proceedings its future intentions and limitations, and its senior executives have given sworn evidence that TPG has no business case for a roll-out. Both these factors create a serious disincentive for a listed public company later performing an about face and rolling out a retail mobile network. By exposing to its competitors its competitive strategy and business modelling, TPG would be under a serious competitive disadvantage if it were to roll-out a new network. This is not to say the Court process is self-fulfilling of the quest for a merger. However, where no objection is taken as to the credit of the major personnel involved in the industry (including, significantly, Mr Teoh), the Court will more readily be able to rely on industry participants' evidence, subject to certain qualifications which I will later address. 20 Further, after the trial process, Vodafone and TPG will have become better informed of the various ways forward and various obstacles to be overcome. It is to be noted that where it is accepted by all parties that the guiding minds of Vodafone and TPG are rational business people, both Vodafone and TPG at the last day of the trial still considered the merger to be in their best interests and Mr Teoh has not resiled from his evidence that no roll-out of a retail mobile network will occur in the relevant future. 21 After all, an important issue I need to assess is whether Mr Teoh and the TPG Board will effectively change his and its mind. There currently stands a Board decision on 29 March 2019 that building a mobile network was not a feasible option, which has been acted upon and effectively re-affirmed in this proceeding. No party is attacking the bona fides of that decision taken in 29 March 2019. The assessment to be made is whether Mr Teoh and the TPG Board would change their mind (should the merger not proceed) keeping in mind that any change of mind will not be occurring until after the prospect of a successful merger is no longer possible. 22 Much of the case presented by the ACCC was that there are technical and financial ways in which TPG could roll-out its network in the future. To some degree, the options the ACCC put forward will be available. Further, in business, challenges are there to be met and overcome. Certainly, in 2017 TPG did not have all the various options (financial and technical) set in stone at the time it decided to enter the retail mobile market. Nevertheless, it is worthwhile to keep in mind that the ACCC will not be the entity rolling out the new retail mobile network the ACCC envisages in its detailing of various future options available to TPG. The risks of such a new venture will be upon TPG and its shareholders. It will be their business decision whether to start again or roll-out in the current and future circumstances that can be predicted. 23 Another very important consideration is to recall the significant difference in the position now and the position when TPG last rolled out its mobile network. One thing that TPG had previously was the will and incentive to enter the retail mobile market in Australia, led by the drive, influence and financial resources available to Mr Teoh. That will and incentive have now gone - that is not in dispute and was attested to by Mr Teoh. I cannot see that this state of affairs will alter in the next five years, even if there were options available or made available in that period of time in a financial and technical sense. The old saying comes to mind - 'where there is a will there is a way' - but without the will of Mr Teoh I cannot see TPG having another attempt to enter the retail mobile market in Australia. 24 I cannot conclude with absolute certainty that Mr Teoh and TPG will not change their minds, and attempt to re-start entry into the retail mobile market in Australia. However, it is extremely unlikely and there is no real chance of this happening in the next five years (or beyond). Putting aside expert testimony which talks of possibilities and opportunities for Mr Teoh in the future in the retail mobile market (which can only be based on certain assumptions), the general thrust of the evidence of the industry participants is that TPG's ship has sailed in the retail mobile market in Australia. I stress I am very aware of the care that must be taken in accepting self-serving statements by interested parties and industry participants. The overall circumstances of the case will provide more reliable guidance than would oral evidence on the part of interested parties. However, the Court does not ignore that evidence, particularly when it is supported by reasons and otherwise credible. I am also aware that TPG and Vodafone in the past have been very pro-active in the promotion of their retail mobile services, and their approach now is more pessimistic. In that regard, out of court public statements of business people in connection with their enterprises come from a belief that their business is the greatest in the world, and without such a belief businesses would probably not prosper. Subject to the constraints of the law, public expressions of belief in one's own business are to be expected and are part of marketing. In addition, care must be taken to put the past comments of market participants in context; as to timing, the market conditions, the level of generality, to what extent they were informed comments, and the circumstances in which they were made to the public. It is to be expected that opinions and views change, given new information or changes in market structure, or arising from market dynamics. This has been made evident by the emerging views of market participants in the retail mobile market over the period from 2017 to 2019. 25 The other point to stress at this stage of the Court's reasons is this. There has been no attempt to discredit any of the lay witnesses head-on: by this I mean suggesting to them in the witness box that they are not telling the truth. Undoubtedly, there are more ways of taking a city in the course of battle other than by a direct attack. The attack in these proceedings has been more subtle; by reference to the likelihood of revisiting the past, the accumulation of other evidence suggesting what could happen in the future and what would be financially and technically feasible if Mr Teoh was in fact minded to roll-out a mobile network in Australia. As the ACCC stated in its closing written submission: One of the fundamental issues for VHA and TPG to confront was why they said that TPG would not return to its pre-merger plan of rolling out a mobile network if the merger was no longer a possibility. Identifying the cogency of the reason for the change in strategy is important because expressions of opinion by executives about what they would do absent the merger when the merger remains on foot and they want the merger to occur are of limited value. That does not require the Court to conclude that those executives do not hold the views they say they have at the time they are expressed. But the likelihood that these would remain their views if the merger was no longer a possibility must be assessed against their past behaviour and conduct. 26 Whilst it is true that the views of participants in the marketplace should be assessed against 'past behaviour and conduct', as I have just indicated, there is limited utility in doing this unless such is viewed in the context of the time that behaviour and conduct took place. 27 However, I should make one matter clear relating to the earlier roll-out of the retail mobile network by TPG. I have not come to the conclusion that the earlier roll-out of the retail mobile network by TPG was considered at the outset by Mr Teoh or TPG to be doomed and destined to commercial failure. Mr Teoh considered that the roll-out of the retail mobile network would be competitive even though the network would be of a lower quality than that of Telstra and Optus. The analysis to be undertaken now in these proceedings must consider the quality of competition in the future. However, in doing this analysis and in assessing the evidence of various witnesses, I have considered the earlier roll-out as one way to assess the reasons given by witnesses for their predictions. 28 I make mention of the issue of efficiencies in the context of merger competition law. The Court is concerned with efficiencies and their effects on competitors. There is no doubt that the benefits of efficiencies, should a merger occur, should not be ignored: although the Court is not concerned just with an individual company's efficiency, or whether the result of a merger is merely shown to improve the efficiencies between the merging companies themselves. The focus must be upon market efficiencies. Nevertheless, it should be recognised that there will be difficulties in proving and exactly quantifying benefits of efficiency with the coming into existence of a merged entity. Whilst efficiency gains must be proved to exist to the satisfaction of the Court, it needs to be recognised that requiring the merged parties to produce evidence where they are not operating as merged entities is difficult, and this difficulty needs to be recognised in assessing the evidence before the Court on the issue of efficiencies. 29 There was some reference in the course of these proceedings to mathematical probability and the assessment of future circumstances. It will be a rare case where mathematical techniques will make a decisive contribution to the resolution of forensic uncertainty. As observed by Mahoney JA in Jones and Another v Sutherland Shire Council [1979] 2 NSWLR 206 at 227-228: the court is required to test its conclusion, not merely according to the subjective conviction of it, but also by reference to the reasonableness of its basis. Whether this involves a conceptual inconsistency in relation to probability is not of significance: in fact the conclusion is so tested. It may be tested, according to the case, against facts otherwise known or assumed to exist, and the inferences from them. The court may also look to the "probability" of the conclusion being correct according to a different meaning of probability. In this sense, it may test the conclusion by reference to the "chance" of its being so, in the sense of Pascal's dice or Beanoulli's "Large Numbers". It may also test it according to what, if they are available, are the statistics (the human experience reduced to numbers) as to the existence of a particular fact in given circumstances. According to such matters, it may modify a view formed on other grounds. … But the probability of the correctness of a particular proposition of fact, at least of the present kind, cannot depend completely upon such a mechanical meaning of probability. There are, as the plaintiff's argument in the present case emphasized, many cases in which Pascalian mathematics cannot be done, because there cannot be, or at least is not, information as to what are the number of "chances" or possibilities, and whether each of these is equally weighted. In such cases, and the present is one of them, the probabilities cannot be determined in that way. The existence of the fact is, subject to testing in such ways as may be appropriate, to be determined according to the court's assessment of the facts, and its confidence that its assessment is correct. Testing aside, it may be that further explanation of this process is a matter for the experimental psychologist rather than for the lawyer or mathematician. 30 All courts in the course of their fact finding function must reach a sufficient level of persuasion depending on the nature of the fact finding they are undertaking. 31 The requisite standard of proof in a civil proceeding is expressed commonly as proof 'on the balance of probabilities'. Expression of the standard of proof in a civil proceeding as satisfaction on the balance of probabilities is an acknowledgment that the judgment to be made by the tribunal of fact is inevitably to be made under conditions of uncertainty. However, whatever its underlying probability, a disputed historical fact once found is a fact which is taken to exist for the purpose of resolving the legal rights or liabilities that are in dispute. Of course, with an analysis involving the predication of the future, further complexities arise in the course of a court's deliberations. 32 After referring to what Dixon J said in Briginshaw v Briginshaw and Another (1938) 60 CLR 336 ('Briginshaw'), Gageler J in an article titled 'Alternative Facts in the Court' (2019) 93 Australian Law Journal 585 wrote: The main thing Justice Dixon was saying, consistently with mainstream judicial and academic opinion in the United States, is that satisfaction on the balance of probabilities involves the formation under conditions of acknowledged uncertainty of a subjective belief. The requisite belief is an "actual persuasion" that the fact in issue actually exists - that a past event the occurrence of which is uncertain and is disputed did indeed occur. What he was emphasising is that belief, as Bentham put it, "is susceptible of different degrees of strength, or intensity". The belief involved in having a state of satisfaction "beyond reasonable doubt", the universally accepted expression of the requisite standard of proof for a fact asserted by the prosecution in a criminal proceeding, is similar to the belief involved in having a state of satisfaction "on the balance of probabilities" in that it is subjective belief and different only in that it is belief that must be held with a greater degree of intensity. 33 In these proceedings the Court has reached a sufficient level of persuasion on the relevant factual issues to reach the ultimate conclusion that the merger would not have the effect, and would not likely have the effect, of substantially lessening competition in the retail mobile market. The Court has been left in no relevant uncertainty, after reviewing the evidence, as to the future of the retail mobile market which will not involve Mr Teoh or TPG entering the Australian retail mobile market in the next five years. 34 Whilst there are a number of reasons leading to the conclusion I have reached, it was accepted by the parties that if I took the view I now have on there being no future likelihood, possibility or real chance of TPG entering into the retail mobile market, Vodafone would be entitled to the declaration sought in these proceedings.

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Introduction 35 As already indicated, Vodafone seeks a declaration that the merger would not have the effect, and would not be likely to have the effect, of substantially lessening competition in any market in contravention of sub-s 50(1) of the CCA. That sub-section relevantly provides that: A corporation must not directly or indirectly: (a) acquire shares in the capital of a body corporate; … if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market. 36 Subsection 50(3) of the CCA provides a list of non-exhaustive factors that must be taken into account when assessing whether an acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in a market. These factors relevantly include 'the height of barriers to entry to the market' (sub-para (b)); 'the level of concentration in the market' (sub-para (c)); 'the dynamic characteristics of the market, including growth, innovation and product differentiation' (sub-para (g)); and 'the likelihood that the acquisition would result in the removal from the market of a vigorous and effective competitor' (sub-para (h)). 37 Because Vodafone seeks a declaration in the terms referred to above, it is necessary for it to establish, on the balance of probabilities, that the merger 'would not be likely to have the effect of substantially lessening competition in the relevant market …'. In analogous circumstances in Australian Gas Light Company v Australian Competition and Consumer Commission and Others (2003) 137 FCR 317 ('AGL'), French J held at 420 [355] that Australian Gas Light Company, the applicant in that case, was required to: negative the existence of any real chance … of a commercially relevant or meaningful lessening of competition flowing from the acquisition. 38 Justice French emphasised at 420 [356] that if the Court was 'left in a position of uncertainty' about the existence of this 'real chance', then Australian Gas Light Company was not entitled to the relief that it sought. 39 It is convenient to set out the legal principles governing the interpretation of several terms which appear in sub-s 50(1) of the CCA, and which are relevant to the resolution of this proceeding.

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'Market' 40 Subsection 50(1) of the CCA focuses upon the effect of an acquisition 'in any market'. The concept of a 'market' is given content by s 4E and sub-s 50(6) of the CCA. Section 4E of the CCA defines 'market' as meaning, unless the contrary intention appears: a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services. Subsection 50(6) of the CCA provides that, for the purposes of sub-s 50(1), 'market' means a market for goods or services in Australia, a State, a Territory or a region of Australia. 41 Several cases have considered the concept of a 'market': see, eg, Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481 ('Re QCMA') at 512-519 (Trade Practices Tribunal); Queensland Wire Industries Proprietary Limited v Broken Hill Proprietary Company Limited and Another (1989) 167 CLR 177 at 195-196, 198 (Deane and Dawson JJ agreeing); Singapore Airlines Limited v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 174-178 (French J); Boral Besser Masonry Limited v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 422-424 [133]-[138] (Gleeson CJ and Callinan J), 427 [155] (Gaudron, Gummow and Hayne JJ), and 456-458 [256]-[259] (McHugh J); Seven Network Ltd and Another v News Ltd and Others (2009) 182 FCR 160 ('Seven Network') at 239-240 [345]-[350] (Dowsett and Lander JJ); Australian Competition and Consumer Commission v Flight Centre Travel Group Limited (2016) 261 CLR 203 at 227 [66] (Kiefel and Gageler JJ); Air New Zealand Ltd v Australian Competition and Consumer Commission (2017) 262 CLR 207 at 221-223 [12]-[15] (Kiefel CJ, Bell and Keane JJ), 231 [44] (Nettle J) and 250-252 [119]-[122] (Gordon J). 42 The parties agree that for the purpose of these proceedings, there are only three pertinent markets, and only one in which there is controversy about competitive effects. 43 The first and most pertinent market is the national market in Australia for the supply of retail mobile services to retail customers. The character of this market has been the subject of a considerable amount of evidence. It is common ground that competition occurs across a number of factors, including price, data inclusions, geographic coverage, service quality, service add-on and retail support. Customers can readily switch from one provider to another. 44 There is no dispute between the parties as to the product and geographic dimensions of the retail mobile market. The product dimension of the centrally relevant market is properly defined as retail mobile services, and the market is Australia-wide. The parties essentially agree that the temporal dimension of the market does not extend beyond five years. 45 The second is the national wholesale market in Australia for the supply of wholesale mobile services to mobile virtual network operators ('MVNO') for the purpose of resupply to retail customers. The only suppliers in this market are Telstra, Optus and Vodafone. The customers are the 60 or so MVNOs operating in Australia. 46 The third is the national retail market in Australia for the supply of retail fixed broadband services to individual/household, small business, government and enterprise customers. As at June 2018, the major competitors and approximate market shares were as follows: Telstra 41%, TPG 25%, Optus 15% and Vocus 7%. Vodafone's share has always been less than 1%. 47 The ACCC accepted in these proceedings that the merger would not have the effect, and would not be likely to have the effect, of substantially lessening competition in the wholesale mobile market or the retail fixed broadband market in contravention of s 50 of the CCA. However, the ACCC denied that the merger would not have the effect, and would not be likely to have the effect, of substantially lessening competition in the retail mobile market.

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'Substantially lessening competition' 48 The concept of 'competition' is not defined for the purposes of sub-s 50(1) of the CCA. However, in accordance with the reasons of the Trade Practices Tribunal in Re QCMA, competition is usually understood as 'a dynamic process [which is] generated by market pressure from alternative sources of supply and the desire to keep ahead'. In short, '[c]ompetition expresses itself as rivalrous behaviour'. 49 As to the meaning of 'substantial' in the context of sub-s 50(1) of the CCA, Beach J held in Australian Competition and Consumer Commission v Pacific National Pty Limited (No 2) [2019] FCA 669 at [1262] ('Pacific National'), synthesising a number of previous authorities, that: [T]he concept of substantially lessening competition does not require a large or weighty lessening of competition, but only one that is meaningful and relevant to the competitive process. A short term effect readily corrected by market processes is not substantial in this respect. But a medium to long term effect not easily corrected may amount to a substantial lessening of competition. 50 When assessing the competitive detriment which is likely to result from the merger, it is generally considered useful to compare the future state of competition with the merger (often described as the 'factual') against the future state of competition without the merger (often described as the 'counterfactual'): see, eg, AGL at 324 [9], 417-418 [352]-[353] (French J), and the authorities cited therein. 51 The Court's task is not to assess whether, if TPG entered the retail mobile market as a fourth MNO, there would be some immediate price reaction from incumbent MNOs. The competitive impact created by new entry is often immediately obvious, but fleeting in its effect. An immediate but transitory increase in competition is not 'substantial' in the relevant sense - it is not meaningful to the competitive process. Therefore, a proposed merger that only forecloses the prospect of some short-term competition will not 'substantially' lessen competition. If, for instance, TPG would have been an unsuccessful and uncompetitive MNO in the medium to long term, the removal of the prospect of TPG entering as a fourth MNO could not 'substantially' lessen competition for purposes of s 50.

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'Likely to have the effect' 52 Since the judgment of French J in AGL (cf Australian Competition and Consumer Commission v Metcash Trading Ltd and Another (2011) 198 FCR at 305 [25] and 318 [89] (Buchanan J) ('Metcash')), it has been generally been accepted that, in the context of sub-s 50(1) of the CCA, the term '"likely" refers to a significant finite probability or "a real chance" rather than "more probable than not"' (AGL at 415 [343])). Justice French reached this construction following an examination of the authorities (see, eg, Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union and Others (1979) 42 FLR 331 at 347 (Deane J); Global Sportsman Pty v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87 (Bowen CJ, Lockhart and Fitzgerald JJ); News Ltd and Others v Australian Rugby Football League Ltd and Others (1996) 64 FCR 410 at 564-565 (Lockhart, von Doussa and Sackville JJ); and Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110), and 'having regard to the statutory context provided by the other sections of Pt IV' of the Trade Practices Act 1974 (Cth) (AGL at 415 [343]). Expanding upon the meaning of the term, French J said in AGL at 416-417 [348], citing, in respect of the final sentence, Rural Press Limited and Others v Australian Competition and Consumer Commission (2003) 216 CLR 53 at 71 [41] (Gummow, Hayne and Heydon JJ), that: The meaning of "likely" reflecting a "real chance or possibility" does not encompass a mere possibility. The word can offer no quantitative guidance but requires a qualitative judgment about the effects of an acquisition or proposed acquisition. The judgment it requires must not set the bar so high as effectively to expose acquiring corporations to a finding of contravention simply on the basis of possibilities, however plausible they may seem, generated by economic theory alone. On the other hand it must not set the bar so low as effectively to allow all acquisitions to proceed save those with the most obvious, direct and dramatic effects upon competition. By the language it adopts and the function thereby cast upon the Court and the regulator in their consideration of acquisitions s 50 gives effect to a kind of competition risk management policy. The application of that policy, reflected in judgments about the application of the section, must operate in the real world. The assessment of the risk or real chance of a substantial lessening of competition cannot rest upon speculation or theory. To borrow the words of the Tribunal in the Howard Smith case, the Court is concerned with "commercial likelihoods relevant to the proposed merger". The word "likely" has to be applied at a level which is commercially relevant or meaningful as must be the assessment of the substantial lessening of competition under consideration... 53 Subsequent decisions - including the judgment of Beach J in Pacific National - have treated the phrase 'would … be likely to have the effect of substantially lessening competition' as requiring the demonstration of a 'real chance' that the relevant acquisition would substantially lessen competition: see, eg, Universal Music Australia Pty Ltd and Others v Australian Competition and Consumer Commission (2003) 131 FCR 529 at 586 [247] (Wilcox, French and Gyles JJ); Seven Network at 330 [751] (Dowsett and Lander JJ); Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 282 ALR 464 at 492 [134]-[135] (Emmett J); Metcash at 341-342 [227]-[229] (Yates J); Pacific National at 263 [1266], 264 [1269], 265 [1274] and 266 [1279] (Beach J); Australian Competition and Consumer Commission v Cascade Coal Pty Ltd [2019] FCAFC 154 at 35 [148]; cf Metcash at 305 [25], 318-319 [89]-[90] (Buchanan J). 54 All parties encouraged me in these proceedings to follow the approach of French and Beach JJ. 55 This Court is not formally so bound to follow these earlier statements of principle. Nevertheless, while this Court may not formally be bound to interpret the term 'likely' as requiring the demonstration of a 'real chance', the weight of authority supports such an interpretation. 56 However, as recognised by Beach J in Pacific National at [1269], despite French J's reasons in AGL in respect of the proper construction of s 50 and the endorsement of the 'real chance' construction in the subsequent case law, several later decisions have introduced a degree of uncertainty as to the application of that test. 57 The uncertainties that have arisen in the application of the test are illustrated by the reasons of Emmett J at first instance, and the separate reasons of Buchanan and Yates JJ sitting as part of the Full Court in Metcash. At first instance, Emmett J propounded a two-stage test with different legal thresholds for the counterfactual and the substantial lessening of competition assessments: (1) first (at [145]), the ACCC, as the applicant in that case, was required to: establish, on the balance of probabilities, what the future state of the market will be, both with and without the proposed acquisition. (2) Secondly (at [146]), the ACCC, as the applicant in that case, was required to prove that: there is a real chance that, if the proposed acquisition does proceed, that would result in a substantial lessening of competition compared to [the counterfactual]. 58 On appeal, Yates J held in Metcash at 342 [230] that it was not necessary for the Full Court to reach a concluded view as to which test ought be applied, because Emmett J had found that even: if the Commission was only required to establish a real chance that its counterfactual case would come to pass in the event that the … acquisition did not proceed to completion, the Commission had not satisfied that standard. Nonetheless, both Buchanan J (at 307-319 [37]-[90]) and Yates J (at 341-342 [215]-[230]), in obiter, considered the construction of the meaning of 'likely', and the appropriateness of separately analysing the counterfactual. 59 Departing from French J's construction of 'likely' in AGL, Buchanan J (at 305 [25]), held that the real chance test should not be applied to s 50, and expressed concern that the test reflected 'a departure from the ordinary civil standard of proof on the balance of probabilities' (at 308 [401]). Justice Buchanan also held that if the counterfactual were to be separately proved, both the counterfactual and the substantial lessening of competition limbs 'require the same standard of proof (balance of probabilities)' (at 308 [40]). Justice Buchanan considered, however, that 'they should probably be regarded as constituent elements of a compound conception' (at 308 [40]). 60 While emphasising that it was not necessary to reach a final view on the matter, Yates J (at 342 [230]) preferred the view that a single-limbed test should be applied, 'involving one evaluative judgment', with the 'real chance' standard applying 'to determine the existence and interrelationship of all of those facts, matters and circumstances' which defined the future state of affairs (at 341 [227], [228]). His Honour explained (at 341-342 [227]-[229]): If one accepts that the starting point is to draw a distinction between circumstances where an acquisition would have the effect of substantially lessening competition, established on the balance of probabilities, and circumstances where an acquisition would be likely to have that effect, established on the basis that there is a real chance that that would be so, it can be seen that s 50(1) itself imposes its own differential standards of proof, at least so far as the determination of competitive effect is concerned. The utility of imposing differential standards, as a matter of legislative policy, is not at all clear, given that contravention will always be established on the lowest threshold being satisfied. Nevertheless, if one is to proceed on that basis in the present case, then one question involving one evaluative judgment emerges: would the acquisition be likely to substantially lessen competition in the relevant market? The answer to that question points to, and depends on, the interrelationship of all the facts, matters and circumstances which, in combination, define the future state of affairs that is characterised as being "likely". If, for the purpose of satisfying the requisite legal standard, "likely" is taken to have the meaning of "a real chance", then it is difficult to see why that standard should not apply to determine the existence and interrelationship of all those facts, matters and circumstances. If not, the possibility exists that different legal standards will intrude into inseparable elements of the calculus employed to detect change to the state of competition. As I have noted, a counterfactual is no more than an element of that calculus. Conceptually, it has no separate existence or purpose in the present context, other than as an aid to detect the existence and extent of change in the process of competition. Moreover, in the continuum of fact-finding, there may not be a bright line between those facts that determine the future state of a market and those facts that determine the future state of competition in that market. Indeed, one can envision examples where the facts that show the likely future state of the market will be the very facts that are determinative of a finding about the likely future state of competition in that market. In those cases, can fact-finding be regulated by two different standards of proof? To require, in those cases, the adoption, if that be conceptually possible, of a higher standard for one purpose (to determine the state of the market) would be to obliterate the threshold to which the second limb of s 50(1) has subjected the impugned conduct. 61 As noted above, in Pacific National, Beach J followed the approach of French J in AGL and Yates J in Metcash in respect of the meaning of 'likely', holding that 'in terms of the standard of proof overall, "likely" has been held to mean a real chance', and that the ACCC, as the applicant in that case, did not 'necessarily need to prove its counterfactual on the balance of probabilities' (at [1266] and [1279]). 62 Furthermore, Beach J rejected the proposition that it was appropriate to assess the counterfactual as a discrete enquiry (at [1276]-[1279]). Rather, endorsing the approach taken by Yates J in Metcash (at [1276]-1279]), Beach J found that 'the subject of the likelihood or real chance is singular in the sense that s 50 refers to the likely effect of substantially lessening competition and thus ultimately poses one question involving one evaluative judgment' (at [1276]). Accordingly, in his Honour's view, the application of s 50 in the case before him (at [1276]): turn[ed] on [his] satisfaction in relation to this single evaluative judgment, even though the exercise of determining whether the competitive effects of a transaction amount to a substantial lessening of competition involves multiple constituent inquiries, namely, identifying the futures with and without the transaction, identifying the effect on competition of each, and then making the relevant comparison leading to answering the one question [above]. Understood in this way, and endorsing the concerns raised by Yates J in Metcash, Beach J considered it 'a distraction to ask what standards of proof apply at each of the atomised constituent steps involved in assessing competitive effects' (at [1277]). 63 Each of the parties to these proceedings accepted that the single evaluative judgment approach is to be adopted. 64 When addressing how, as a matter of practical reality, this single evaluative judgment was to be made, Beach J said at [1279] that: the ACCC does not necessarily need to prove its counterfactual on the balance of probabilities. But the magnitude of any real chance that it demonstrates in respect of the alleged future states will practically and ultimately affect the magnitude of the real chance that it is able to demonstrate in respect of the alleged effects on competition and whether that rises to the requisite level of a likely effect of substantially lessening competition. … 65 Consistently with the analysis of French J in AGL, the reasoning of Yates J sitting as part of the Full Court in Metcash, and Beach J in Pacific National, it is appropriate for the Court in these proceedings to make a 'single evaluative judgment'. In these proceedings, that 'single evaluative judgment' requires Vodafone to satisfy the Court that there is no 'real chance' that the merger would likely have the effect of substantially lessening competition (Pacific National at [1277] (Beach J); Metcash at 341-342 [227]-[229] (Yates J)). This is the approach I intend to take. 66 However, I note the submissions of Vodafone, which wished to reserve its position on this issue should the matter go on appeal. 67 Vodafone referred to the analysis of Buchanan J sitting in the Full Court in Metcash. As Buchanan J there explained, the 'real chance' standard appeared to slip into the jurisprudence in a series of cases where the construction of 'likely' was in no way dispositive. That same observation can equally be made of Beach J's recent judgment in Pacific National. Vodafone submitted that the authorities in this Court are not a basis for adopting the 'real chance' construction, particularly given that that construction is at odds with the ordinary meaning of the word 'likely'. Vodafone contended that the language of 'real chance' is a gloss on the language of the text of the statute, and a surer guide to the proper application of s 50 is to use the language of the statute. 68 I see some force in this approach. One must distinguish between the requirements of the substantive law (s 50) and the principles or rules of evidence. The content of s 50 is not addressing the evidentiary burden. It is addressing the present ('would have the effect') and the future ('be likely to have the effect') in the context of competition in the relevant market. The burden of proof is set out in s 140 of the Evidence Act 1995 (Cth), keeping in mind the principles referred to by Dixon J in Briginshaw and my discussion above. This does not take away from the evaluative or quantitative judgment a Court still needs to make, which will involve the concepts referred to by French J in AGL: 'commercially relevant or meaningful' (at 420 [355]), not 'a mere possibility' (at 416-417 [348]), and operating 'in the real world' (at 416-417 [348]). These concepts are relevant to the substantive requirement of s 50 to give effect to competition law and policy in the context of merger management. I intend to apply these concepts in these proceedings. 69 However, whatever test is adopted ultimately makes no difference to the outcome in these proceedings because of the conclusions I have reached on the issues presented to the Court.

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WITNESSES 74 The lay witnesses were as follows: 75 Evidence type Witness name Witness description Evidence relied upon by Witness cross-examined (Y/N) Lay Badrinath, Vivek Chief Executive Officer - Rest of World Region, Vodafone Group Plc VHA Y Baker, Vaughan Group Director, Government and Corporate Relations, MyRepublic Group Limited ACCC Y Banfield, Stephen Chief Financial Officer and Company Secretary, TPG TPG Y Barlow, Todd Managing Director, Washington H. Soul Pattinson & Company Limited TPG Y Berroeta, Iñaki Chief Executive Officer, VHA VHA Y Bley, Yonatan Head of Pricing and Product for Pre-paid, VHA VHA N Bromhead, Nicholas Leader, Telstra Wireless Solutions, Ericsson Australia Pty Limited ACCC Y Chao, Zhang Senior Product Manager, Huawei Technologies Malaysia TPG N Davies, Michael Head of Revenue, Macquarie Telecom Group Pty Ltd ACCC Y Haigh, Adam Senior wireless engineer / Radio Solutions Manager, Nokia Solutions and Networks Australia Proprietary Limited ACCC Y Hanly, David General Manager Networks, TPG TPG Y Jiang, Yilin Executive Product Manager, Huawei Technologies (Australia) Pty Ltd TPG N Keane, Jonny Data Analytics Manager, VHA VHA N Levy, Craig Chief Operating Officer, TPG TPG Y Lopez, Yago Head of Radio Access Network, VHA VHA Y Naik, Dayandhan (Reggie) General Manager, Fibre Operations & Mobile Deployment, TPG TPG Y Pachos, Nick General Manager, Product & Carrier Management, TPG TPG N Pham, Philip Head of Revenue Growth and Insights, VHA VHA N Sivagnanam, Easwaren General Manager Technology Strategy, VHA VHA Y Sixt, Frank Executive Director, CK Hutchison Holdings Limited VHA Y Teoh, David Executive Chairman of the Board and Chief Executive Officer, TPG TPG Y Wang, Hong Wei Principal Engineer, Wireless Network Product Line Department, Shanghai Huawei Technologies Co. Ltd TPG N Ward, Desmond Electromagnetic Energy Manager, VHA VHA Y Ward, Glenn Director - Sales and Carrier Relations, Exetel Pty Ltd ACCC Y Willis, Jennifer Lawyer, Allens Linklaters VHA N Expert Björnson, Emil Massive MIMO expert, Associate Professor, Linköping University TPG Y Davis, Warwick Economic expert, Frontier Economics TPG N Foster, David Economic expert, Director, Frontier Economics TPG Y Gray, Dr Stephen Valuation and corporate finance expert, Professor of Finance at the University of Queensland Business School / Frontier Economics VHA Y Martin, Ian Telecommunications sector investment expert, New Street Research / Ian Martin Advisory TPG N Neal, Michael Corporate finance expert, Director, Wylde Capital Pty Ltd ACCC Y Padilla, Dr Jorge Economic expert, Compass Lexecon Europe VHA Y Smith, Patrick Economic expert, Partner, RBB Economics ACCC Y Wright, Michael Mobile networks expert , Principal, Quadrature Pty Ltd ACCC Y

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76 The determination of these proceedings does not substantially turn on questions of credit in relation to any of the witnesses, including the lay witnesses. In relation to criticisms concerning individual expert witnesses I will consider these in other parts of my reasons. 77 However, I make these general observations on two expert witnesses. 78 Mr Smith was an expert economist called by the ACCC. Clearly Mr Smith is highly skilled and very thorough in his written and oral evidence, specialising as he does in the economics of competition and regulation. He applies economics, econometrics and industrial expertise to competition policy, litigation and arbitration. Mr Smith has acted as an expert witness in investigations of mergers, whether horizontal or vertical, and abuse of market power inquiries, covering excessive pricing, price discrimination, margin squeezing and predation, as well as in the assessment of pricing, profitability valuation and damages estimation in the context of dispute resolution and international arbitration. However, Mr Smith is not familiar with the telecommunications industry, which he readily accepted. Mr Smith necessarily had to rely upon a number of assumptions in reaching his conclusions, but himself recognised that the conclusions he reached would depend upon many factual matters to be determined by the Court in these proceedings. 79 A very important expert witness for the purposes of these proceedings, recognised as such by all parties, was Mr Wright. Mr Wright was an expert called by the ACCC to give evidence on retail mobile networks. Mr Wright had 37 years of experience in the telecommunications industry, and was well versed in the details of rolling out and operating a mobile network in Australia. 80 Mr Wright was a disinterested and objective witness - as lead Counsel for the ACCC put it, he had 'no dog in this fight'. I have in the main accepted Mr Wright's evidence: it provides significant objective evidence in a consideration of Mr Teoh's position and in predicting the future of the retail mobile market.

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Characteristics of mobile networks in Australia 83 As a very general statement, the retail mobile market is a market characterised by relatively robust price competition which has only intensified since 2014. 84 Retail mobile services in Australia are supplied by MNOs and MVNOs. There are three MNO competitors in Australia, being Telstra, Optus and Vodafone. There are approximately 60 MVNO competitors in Australia. MVNOs acquire mobile services on a wholesale basis from MNOs. 85 Mobile networks have three primary components: (1) a RAN, consisting of base stations that communicate with mobile devices over designated spectrum; (2) a 'backhaul' transmission network, which connects the RAN sites to the core network; and (3) a core network, which connects and manages the different parts of the network and connects to other networks (including the internet). 86 An MNO requires considerable funding to establish and maintain a mobile network. Operating a mobile network is a capital-intensive business driven by the need for constant investment. This is because competitive pressures demand constant improvements in capacity and quality: (1) mobile technology is constantly evolving, with each new generation enabling new services and better quality. At present, the introduction of 5G is driving the requirement for MNOs to invest in upgrading their networks, with Telstra and Optus already offering 5G services; (2) it is necessary to increase regularly the capacity of the network to ensure that a quality service can be delivered to consumers. This can only be done by acquiring additional spectrum if available, building new sites and/or upgrading equipment. At present, there is an urgent need to increase capacity because consumer data usage is increasing each year. Telstra and Optus have reported that data traffic on their networks is growing at 50% year-on-year. XXX XXXXXXX XXXXXX XXXX XX XXXX XXXXXX XX XXX XXXXXXXX XXXXXXX XX XXXXXXX XXX XXX XXXX; (3) it is necessary to replace aged or superseded equipment; and (4) it is necessary to maintain and upgrade networks between generational changes. 87 Given the high fixed cost involved in establishing and maintaining a mobile network, scale is very important for an MNO to compete effectively. By contrast, entry is relatively easy for MVNOs, which rely on wholesale access to an MNO's network to supply services to customers.

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Significance of network coverage and capacity 88 Two key aspects of the quality of a mobile network are: (1) 'coverage' - the geographic locations that a customer's mobile device is able to connect to a base station site in the mobile network; and (2) 'capacity' - the amount of combined data bandwidth (usually measured in multiples of bps) a network has to support the volume of voice and data traffic generated by multiple simultaneous users on a network at defined performance standards. 89 Coverage can be measured either by geographic area or the proportion of the Australian population that the MNO can reach. Indoor coverage is also an important aspect of the quality of a network. While coverage is typically advertised on an outdoor basis, each MNO has sought to achieve good indoor coverage as consumers require coverage indoors, at work and at home. Achieving indoor coverage requires significantly higher RAN investment than that required to achieve outdoor coverage. 90 To offer the mobility that customers expect from mobile services, coverage needs to be provided in the areas where customers 'work, live and play', and the areas in-between. If an MNO does not have coverage in an area, its customers will be unable to use their mobile devices in that area. Coverage is important to consumers, corporates and enterprise customers - in other words, 'coverage matters' and is a significant aspect of competition between MNOs. It is for this reason that MNOs and MVNOs advertise and promote their network coverage. 91 The capacity of a mobile network is affected by: (1) the nature and amount of spectrum to which the MNO has rights; (2) the location, number and type of macro RAN sites and small cell sites; (3) the capability and type of equipment used in the network, including spectral efficiency of the technology used; and (4) the capacity of the transmission network. Telstra currently holds more spectrum than Optus in regional and rural areas and more than Vodafone and TPG in all areas (ie metropolitan, regional and rural) while Optus holds more spectrum than Telstra, Vodafone or TPG in several major metro areas. 92 Network coverage and capacity contribute to customers' perceptions of network quality, which refers to factors such as voice quality, ability to establish a call, ability to maintain a call, data speed and latency (ie time taken for data to travel to and from the customer). Lower network quality may, for example, manifest in slow download speed (which results in 'buffering', ie delays in service), an inability to use certain mobile applications or poor voice quality or drop outs. The maximum video resolution that can be streamed depends on the capacity that is made available by the network. 93 Poor network quality is a driver of customers switching from one MNO to another (referred to as 'churn'). Total network capacity affects the number of customers an MNO network can sustain. 94 Inferior network quality was the cause of what has come to be known as 'Vodafail' (which I will discuss in detail later). From December 2010, Vodafone experienced serious network issues, which caused high rates of dropped calls and poor internet connectivity. Vodafone lost considerable market share which it has never recovered despite making significant network investment. 95 Given the importance of network quality to customers, Vodafone, Telstra and XXX XXXX XXXX XXXXX XXXX XXXXX XXXX XXXX XXXX XXXX. Vodafone uses Ookla data, and other measures, to report its network speeds internally. That data shows that Vodafone's average download speeds have declined and are now considerably lower than Telstra and Optus' average speeds. 96 XXXXX XXXXX XXX XXXXXXXX XXXX XXXXX XXXXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXXXXXXX XXXX XXXXX XXXXX XXXXX XXXX.

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Vodafone 97 Vodafone is the third largest supplier of mobile telecommunications services in Australia. Its business comprises the supply of retail mobile services, wholesale mobile services to MVNOs, and since December 2017, the supply of retail fixed line broadband services on the NBN in metropolitan areas. Vodafone supplies retail mobile services under the 'Vodafone', 'Lebara' and 'Kogan Mobile' brands. Vodafone's mobile customer base comprises approximately six million customers. Vodafone uses the Lebara and Kogan brands as its second brands with a view to targeting value or price sensitive consumers at the low end of the market (XXXXXXXXX XXXXX XXXXXX XXXXX XXX). 98 Vodafone operates a 3G and 4G mobile network. As a result of the 'Security Guidance' (which I will return later to), to roll-out a 5G network, Vodafone must replace its existing Huawei 4G equipment with new equipment. This would also be the case for MergeCo. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXXXXX XXXXXX XXXXXX XXXXX XXXXX XXXX XXXX XXX XXXXXXX XXXXXX XXXXXX XXXXXX XXXXX XXXXXX XXXX XXXX XXXX. 99 Vodafone supplies mobile services to enterprise customers. Vodafone's revenue from the sale of mobile services to enterprise customers in the 2018 financial year was around XXX XXXXXXX. This figure includes sales of mobile services to the small office/home office segment ('SOHO') as well as small businesses. 100 Other than retail fixed broadband services through the NBN to consumers and SOHO, Vodafone does not offer any fixed telecommunications services to businesses. Vodafone is not a relevant competitor in that segment as it does not provide services such as static IP, fibre transmission, fixed voice, cloud and colocation services that are provided by entities such as TPG and Macquarie Telecom. 101 The geographic coverage of Vodafone's network is approximately 600,000 square kilometres and reaches around 96% of the population. Vodafone acquires roaming services from Optus under an agreement which came into effect in 2012. Under that agreement, Optus supplies roaming services to Vodafone, which extends Vodafone's network coverage from 600,000 square kilometres (reaching 96% of the Australian population) to 900,000 square kilometres (reaching 97% of the Australian population). 102 The cost of roaming under this agreement is unsustainable for Vodafone: XXXX XXXX XXXX XXXX XXXXXX XXXXXX XXXXX XXXXX. This was largely due to the significant increases in mobile data traffic XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX. Vodafone has taken 'demand management' steps to try to curb the costs XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX.

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Telstra 108 Telstra supplies retail mobile services and retail fixed broadband services and has the largest number of subscribers for those services. It is the largest MNO by a considerable margin, with over 15 million subscribers. This market share does not include Telstra's market share in the enterprise and government sectors, nor its second brands and MVNOs. 109 Telstra supplies retail mobile services under: (1) the 'Telstra' brand. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX; (2) its second brand, 'Belong'. Belong is a division of Telstra Corporation Limited. Belong commenced supplying retail mobile services in around October 2017 and by 30 June 2019, had around 248,000 subscribers. Telstra launched Belong to seek to improve Telstra's ability to capture share in the price sensitive segment; (3) the 'Boost Mobile' brand. Boost Mobile acts as a reseller for Telstra. Telstra's focus for Boost has traditionally been the youth (16 to 34 years old) segment, and target customers such as school leavers, university students and young people starting their first job. 110 Telstra has 3G and 4G networks and is in the process of rolling out a 5G network. Telstra is advertising its 5G proposition heavily. Telstra has also already introduced Samsung and LG phones that are 5G compatible and engaged in significant marketing to promote its 5G roll-out. Telstra's marketing is aimed at educating customers about 5G and its benefits. 111 The geographic network coverage of Telstra's 3G and 4G networks greatly exceeds that of its competitors. Given that Telstra owns almost all of the network infrastructure in regional and rural Australia, other MNOs are required to pay Telstra, typically at a premium price, to access its infrastructure in order to provide services in these areas. For example, Vodafone must pay Telstra for use of its transmission infrastructure in certain regional areas where Telstra is the only supplier. Some transmission services are regulated but many services and elements of the charges are not. 112 Technology leadership is an important part of Telstra's competitive strategy and it invests heavily in its mobile and fixed networks to achieve it. 113 Telstra is able to offer bundled products and services due to its position in the mobile and fixed services markets. Telstra also has a dominant position in the supply of both fixed and mobile telecommunication services to corporate and government sectors. In the 2018 financial year Telstra reported that its mobile services revenue for its small business and enterprise segments was $2.775 billion. 114 Telstra supplies mobile services by wholesale to MVNOs and, following Optus, has the second largest number of customers of wholesale mobile services. Currently, the MVNOs on Telstra's network include: ALDI Mobile, Lycamobile, Pennytel, Southern Phone, Tangerine Telecom, TeleChoice, Think Mobile and Woolworths Mobile. As at December 2017, Telstra had 862,000 MVNO subscribers. By December 2018, that figure had grown to 1,098,000 subscribers. 115 Telstra owned and operated the legacy copper network, prior to its recent transfer in part to NBN Co. Telstra owns and operates an extensive transmission network and supplies wholesale transmission services to other service providers. Telstra acquires wholesale services from NBN Co, supplies NBN wholesale aggregation services to smaller retail service providers and has had the largest number of wholesale services in operation on the NBN. 116 Telstra is in a very strong financial position, with significant funds available for capital expenditure. Its financial position is in part due to its arrangements with government including NBN Co, under which Telstra received substantial payments from NBN Co for the transfer of its copper and hybrid fibre coaxial assets, duct rentals and in respect of each customer disconnected from Telstra's access network.

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Optus 117 Optus supplies mobile services in Australia and is the second largest MNO in Australia with a retail market share of approximately 28%. As at 31 March 2019, Optus had over 10 million wholesale and retail mobile subscribers. Optus has a 3G and 4G network and is also in the process of rolling out a 5G network. Optus supplies retail mobile services under the 'Optus' brand. It used the 'Virgin Mobile' brand until May 2018, but has been phasing it out since then. In February 2018, Optus entered into an agreement with Catch Group, which has a similar business to Kogan, to sell Optus mobile services under the brand 'Catch Connect'. 118 Optus also supplies wholesale mobile services to MVNOs and has the highest number of customers for wholesale mobile services. Currently, the MVNOs/resellers on Optus' network are: amaysim Australia Limited ('amaysim'), Catch Connect, Coles Mobile, Dodo, Exetel, Hive Mobile, iiNet, Jeenee Mobile, Moose Mobile, OVO, Southern Phone, SpinTel, Vaya and Yomojo. amaysim is the largest MVNO in Australia. As at December 2018, amaysim reported having around 1.2 million subscribers. 119 Like Telstra and Vodafone, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX. Optus' strategy has also been to position its Optus branded business as comparable to Telstra's 'premium network'. To that end, Optus has invested considerable amounts of money to improve and market network performance. It has also sought to differentiate its offering by investing in acquiring content for broadcast to its subscribers. 120 Optus has the third largest number of customers for retail fixed broadband services, following Telstra and TPG. To supply these services, Optus acquires wholesale services from each of NBN Co and Telstra. Optus also supplies NBN wholesale aggregation services to smaller retail service providers and has had the third largest number of wholesale services in operation on the NBN. 121 Optus also supplies mobile and fixed telecommunication services to corporate and government customers. It is one of the key competitors in this space, although it is a long way behind Telstra. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX. Optus also owns and operates its own transmission network and supplies wholesale transmission services to other service providers. 122 Optus is in a strong financial position and has significant funds available for capital expenditure.

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Types of mobile services offered (pre-paid and post-paid) 129 There are two main types of mobile products sold in Australia: pre-paid mobile products and post-paid mobile products. With a pre-paid mobile product, customers pay in advance for a particular voice and data allowance to be used within a particular period. Following that period, the subscriber must 'recharge'. With a post-paid mobile product, customers are billed on a regular basis after a period (typically monthly) of usage pursuant to a customer's contract (usually 12, 24 or 36 months). The customer does not lose access to mobile services if they exceed their plan allowances. However, they may be charged for any additional usage on their next bill. 130 Vodafone supplies both pre-paid and post-paid products under its primary 'Vodafone' brand, as do Telstra and Optus under their primary brands. Vodafone also supplies pre-paid products under the Kogan and Lebara brands. Vodafone's post-paid products account for around XX% of Vodafone's total retail mobile revenue. Post-paid plans may be offered as SIM only ('SIMO') plans or as handset plans. Under SIMO plans, customers purchase a mobile service but not a mobile handset for use in connection with that service. Under handset plans, customers purchase both a mobile service and a handset and pay for the cost of the handset over a specified period (12 to 36 months). While pre-paid mobile services may be bundled together with a handset, in many cases pre-paid mobile services are supplied without a handset. 131 Each of the MNOs and MVNOs offer a range of pre-paid and post-paid plans, all at different price points or headline prices. Post-paid plans offered by the MNOs under their primary brand are generally priced at over $30. For example, Vodafone does not offer pre-paid or post-paid products on its Vodafone brand for less than $30 per month. 132 This distinction between pre-paid and post-paid is beginning to break down. For example, some pre-paid products are now being offered on an automatic renewal or 'auto top up' basis. Notwithstanding this, the distinction between pre-paid and post-paid remains important. 133 The competitive dynamics in each segment are different. MVNOs by and large target the pre-paid segment, and to a much lesser extent, the post-paid segment. Within Vodafone, there are separate business units for pre-paid and post-paid products, each with its own pricing team. 134 Each of Vodafone, Telstra and Optus equates pre-paid with the price sensitive segment of the market (that is, customers who value price over quality in the trade-off) and post-paid with the high end segment of the market (that is, customers who value quality over price). XXXXX XX Vodafone, Telstra XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX. 135 TPG was proposing to launch a pre-paid product and was unlikely to have a handset offering. The competition was to be focused, at least initially, on the segment of the market TPG was proposing to target. 136 The table below sets out the number of pre-paid and post-paid subscribers on each of Vodafone, Telstra and Optus. These figures include both retail and wholesale subscriber numbers:

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Post-paid segment 144 A feature of mobile markets is that they are also characterised by significant product differentiation. Economists distinguish between horizontal differentiation (where some customers will choose one brand and other customers a different brand even if they cost the same) and vertical differentiation (where one product is of higher quality and would be preferred by all customers if priced the same as the lower quality product). Differentiation may give rise to pockets of market power if some firms manage to differentiate themselves substantially from others. If one operator has a substantially better network than others, it will face limited competitive constraints. 145 Each of Vodafone, Telstra and Optus has employed strategies designed to differentiate their network and product offerings in the post-paid segment. While the quality of each network has improved, prices (and quality adjusted prices) have continued to fall. While Telstra charges a premium relative to Vodafone and Optus, nevertheless the post-paid segment also exhibits significant price competition. 146 Telstra's long term strategy has been to differentiate its network with a view to charging a premium. 147 Each of Vodafone and Optus has been competing aggressively for post-paid subscribers since at least 2014. This is no doubt due to the fact that this segment is the most profitable for the MNOs: the vast majority (around XX%) of Vodafone's mobile services revenue comes from post-paid products rather than pre-paid products. Telstra and Optus' post-paid subscribers and average revenue per user is higher for post-paid than pre-paid. 148 Following Vodafail, Vodafone has sought to win back its market share loss. Vodafone has implemented various pricing strategies ahead of Telstra and Optus in this segment, as well as investing to upgrade the quality of Vodafone's network. Optus has also invested considerable sums of money in its network and in content for its subscribers, with a view to differentiating its network. However, notwithstanding this improvement in network quality, Optus has still been pricing aggressively. As a general proposition, the market is characterised by participants seeking to 'give more, charge less'. 149 Telstra has also sought to meet the competition in the post-paid segment by itself engaging in price competition. 150 Competition in the post-paid segment has also been characterised by considerable competition between Vodafone and Optus, where reductions in price or increases in inclusions such as data allowances by one competitor are met by the other. 151 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX. This has had an impact on Vodafone's ability to constrain Optus and Telstra in the post-paid segment.

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Competition through inclusions 152 Competition in the retail mobile market also manifests by MNOs and MVNOs regularly increasing the attractiveness of their offers by offering subscribers additional inclusions. Given that unlimited national calls and text are now a feature of most pre-paid and post-paid plans, including those at low price points, the competition focuses on: (1) increasing the amount of data included in a plan. MNOs and MVNOs offer subscribers additional data by changing the advertised 'base inclusion' in the plan or offering a promotion such as an additional 10 GB on a $30 pre-paid plan for the first three recharges; (2) increasing the value of international calls included in a plan. This includes introducing unlimited international calls and text messages as a feature of that plan for a specified number of countries; (3) offering better overseas roaming; (4) offering subscribers data free downloads for particular content such as data used to stream movies on Netflix or Stan or to stream music from applications such as Apple Music and Spotify; and (5) offering free content to subscribers on a particular plan. This may be content supplied by a third party provider or content offered by the mobile services provider itself. 153 Analysis conducted by the ACCC comparing data allowances between 2013-2014 and 2017-2018 concluded that data allowances had increased considerably during that period. The ACCC found that, for pre-paid services, the median and mean data allowances increased from 1 GB and 1.9 GB respectively to 7 GB and 11.5 GB respectively in that period. For post-paid, the ACCC found that median data allowances had increased from 1.5 GB to 6 GB during the same period, with mean data allowance rising from 1.7 GB to 14.2 GB. 154 The data allowances offered by MNOs and MVNOs only continued to increase between 2017 and 2019 for both pre-paid and post-paid products. 155 Similarly, promotional activity offering consumers 'bonus data' is now a regular occurrence in the market. 156 The post-paid segment has also now moved to endless data plans. This was first introduced by Vodafone in May 2018, when Vodafone introduced an 'endless' data plan. As with all other mobile plans, this plan provided subscribers with a data allowance at unrestricted data speeds. However, where the subscriber exceeded their data allowance, they could continue to use data without being charged for the excess. However, that additional data usage was supplied at a slower speed of 1.5 megabits per second ('Mbps'). At around the same time, Telstra introduced a similar endless plan for its 12 month SIMO post-paid plans at the $69 per month price point. However, in June 2019, Telstra extended this endless plan feature to all of its post-paid plans including its cheapest post-paid plan commencing at $50 per month. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX.

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The MNOs and their networks 158 It is worth stressing again that: Telstra is the largest MNO by a considerable margin, supplying approximately 17 million mobile customer services, with a retail mobile market share of about 42%. The geographic coverage of Telstra's mobile network substantially exceeds that of Optus and Vodafone, covering around 2.4 million square kilometres and reaching around 99.3% of Australia's population. Optus is the second largest MNO, supplying approximately 10 million mobile customer services, with a retail mobile market share of about 28%. Its network covers around one million square kilometres and reaches approximately 98% of Australia's population. Vodafone, by contrast, has the third largest mobile network, with only approximately six million mobile customer services. Its geographic coverage is substantially smaller, covering around 600,000 square kilometres, and the network only reaches 96% of Australia's population. 159 A competitive advantage that Telstra and Optus have over Vodafone and TPG is their relatively larger spectrum holdings. I will come to consider spectrum later in these reasons, but in my view there is no doubt that the mere having of larger quantities of spectrum gives a competitor an advantage. 160 Telstra and Optus each have significantly larger quantities of spectrum than Vodafone or TPG in an absolute sense. There is a linear relationship between the amount of spectrum that an MNO has and the per user data speed its mobile network provides. All other things being equal, more spectrum means that an MNO can deliver more capacity to users relative to other MNOs. If an MNO has less spectrum than another MNO, it has to incur the cost of investing in more cell sites, or better spectral efficiency of its RAN equipment, in order to deliver the same capacity as that other MNO. 161 Mr Teoh considered that TPG is and was at a competitive disadvantage to the incumbent MNOs with its relatively poor amount of spectrum. Professor Björnson said that if TPG deployed a mobile network with the same infrastructure as existing MNOs, the only differentiating factor would be the spectrum holdings, and TPG's per user data speeds and area capacity would be approximately 18% to 30% lower than those achieved by the existing MNOs. Mr Teoh referred to the limited spectrum and directly linked that limitation to the increasing demands for data and speed: Then we look at what we have, the 30 megahertz of the 3.5. We can't do it. Even if I put up the 5G today, even there is a solution like what you say, there is no security ban, I put up the… 4G, 5G, I put up the massive MIMO. I'm not able to do it even today, even to compete with Optus. And the market in three, four, five years' time, people demand for capacity, demand for speed, because of the user demand and also because of the technology development. So you envisage that the usage and the speed would go up. But… there is a limitation because of the spectrum constraint that we have. So we will never get there. And what Telstra and Optus can do is keep driving us - this competition in Australia. And we can't do that with our limited spectrum of 30 megahertz of the 3.5 we will never be able to do that. 162 In addition, the kind of spectrum that an MNO holds is significant, because spectrum propagation characteristics differ between low, mid and high band spectrum. In particular, low band spectrum (between 700 MHz and 1 gigahertz ('GHz')) propagates further than mid or high band spectrum, and penetrates obstacles such as trees more easily. This means that low band spectrum leads to higher per user spectral efficiency and better geographic coverage than mid or high band spectrum. This is commercially attractive to MNOs, because fewer cell sites are required for providing coverage over a geographic area when using low band spectrum compared with mid or high band spectrum, and it provides better in-building coverage, which is advantageous in dense urban environments. In this regard, Telstra and Optus have more than twice the amount of low band spectrum as Vodafone, and four times the amount of low band spectrum as TPG. 163 Then in relation to 5G, both Vodafone and TPG have extremely limited 3.6 GHz spectrum holdings relative to Telstra and Optus. In metro areas, Telstra has 60 to 63 MHz of 3.4/3.6 GHz spectrum and Optus has 65 to 100 MHz of 3.4/3.6 GHz spectrum; TPG (and for that matter Vodafone) only has access to 30 MHz through a joint venture. When asked whether Vodafone had enough 5G spectrum, one of Vodafone's shareholder representatives, Mr Sixt, said that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX.

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Network coverage 175 The lay evidence demonstrated that network coverage, which is reference to the geographic area within Australia serviced by an MNO, or the proportion of the Australian population that the network can reach, is another driver of competition in the retail mobile market. Professor Björnson said that the main challenge in mobile networks is to provide 'good geographical coverage', and that while data speeds and capacity have improved greatly over time, 'the lack of coverage at certain locations is still a concern that many people experience daily'. 176 Mr Berroeta said that customers demand mobile connectivity when they go from one location to another, and will be dissatisfied if continuous coverage is not provided. He said it is a significant aspect of competition between MNOs. 177 In a similar vein, Mr Levy said that one limitation of TPG's planned mobile network was its limited coverage, which would be less than that of at least Telstra and Optus. He gave evidence that the likely coverage gaps in TPG's planned mobile network meant that any mobile offer made by TPG needed to offer a sufficiently low price and high data inclusion to compensate for this deficiency and to make the network appealing. 178 Likewise, Exetel's Mr Ward accepted that competition in the retail mobile market is focused on coverage in addition to data inclusions, so much so that Exetel markets itself on the basis that its customers have the benefit of Optus' 4G network. Macquarie Telecom's Mr Davies also agreed that for its customers (which are business and enterprise customers), network coverage is an important matter, particularly in building coverage. 179 As alluded to already, Telstra and Optus have a substantial advantage over Vodafone, in terms of both the geographical and population coverage of their networks. The network coverage of TPG's planned mobile network would have been substantially inferior still, relative to all of the MNOs, both during the initial roll-out and after the initial roll-out had been completed. 180 When TPG announced its initial unlimited product on 9 May 2018, which it expected to launch in the third or fourth quarter of 2018, TPG's coverage was to be limited to 39 metropolitan suburbs. Further, Phase 1 of TPG's roll-out was to be even more narrow, being limited to the '366 Polygon' in Sydney (which covered the CBD, eastern suburbs and a corridor of western Sydney extending to Homebush), and the '260 Polygon' in Melbourne (which covered the CBD and inner south and north suburbs).

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Trends in ARPUs and data inclusions on mobile phone product 184 In response to this rapidly growing data usage amongst mobile customers, MNOs and MVNOs are now offering significantly larger data inclusions at lower price points than they did in 2017. 185 For example, the ACCC's Communications Market Report 2017-2018 records a significant upward trend in mobile data allowances in recent years. When price and other non-price characteristics (ie contract length, SMS inclusions etc) are held constant, data allowances increased by approximately 172% between 2016-2017 and 2017-2018. Between 2016-2017 and 2017-2018, mobile data allowances for post-paid mobile phone plans increased by 91%, while pre-paid mobile services increased by 153%. Further, the data inclusion growth rate was higher between 2016-2017 and 2017-2018, compared with the two years prior. 186 At the low-ARPU end of the market during the past two years, many MVNOs have significantly increased the data inclusions they offer in retail mobile plans. For example: (1) In October 2017, Exetel was offering customers 1 GB of data for $9.99 per month on a month-to-month SIMO plan. As at July 2019, Exetel was offering 10 GB of included data on a $24 per month plan. As compared to March 2018, Exetel now offers 3 GB instead of 1.5 GB at $14.99, 10 GB instead of 6 GB at $24.99, and 18 GB at $29.99 instead of 10 GB at $34.99. (2) In October 2017, amaysim and Belong were offering customers 5 GB of data inclusions for $30 per month on a month-to-month SIMO product. As at July 2019, Belong was offering 10 GB of included data on a $25 per month plan and amaysim was offering 5 GB of data on a $20 per month plan. This trend is consistent amongst other MVNOs, such as Dodo, Vaya, Kogan Mobile and Boost Mobile. 187 Further, MNOs have started to compete at the lower ARPU end of the market: (1) Optus has increasingly started to offer lower ARPU plans, offering a pre-paid SIMO plan with up to 35 GB of data for $30 per month, and SIMO plans for $40 per month with 40 GB of data inclusions on its 12-month contract plans respectively. (2) In June 2019, Telstra launched new data-only mobile plan contracts which offer between 5 GB and 100 GB of data inclusions per month for between $15 and $75 per month. 188 At the higher ARPU end of the market, MNOs have also increased their data inclusions by significant amounts. 189 There has also been significant downward pressure on mobile service ARPUs during the past two years. In this regard, Mr Martin gave evidence that post-paid ARPU, pre-paid ARPU, mobile broadband and blended ARPU have fallen significantly for both Telstra and Optus each year over the three years to June 2019. For example, Telstra's post-paid ARPU has fallen by about $7.30 per month (4.1% CAGR) and Optus' by about $14 per month (9.4% CAGR) over those three years. Optus' pre-paid APRU has fallen by nearly $6.50 per month (9.7% CAGR) over the three years. 190 Likewise, amaysim's financial reports from the 2015 financial year to the first half of the 2019 financial year demonstrate the continuing decline in its ARPU. 191 I expect that these trends will continue in the future. Mr Martin, an experienced telecommunications analyst with over 25 years' experience advising investors on the sector, gave evidence that competition in the Australian mobile market is likely to continue at a high level as Telstra and Optus continue to increase data allowances at given price points. Mr Levy and Mr Teoh also gave evidence which supported the expectation that these trends will continue.

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In relation to TPG 194 TPG has, or will shortly have, available a technical solution to enable it to recommence the roll-out of a predominantly small cell 4G mobile network with a 5G upgrade path. It has sufficient spectrum to support such a network. It will likely have the financial capacity to roll-out a mobile network. If TPG considers a roaming agreement to be fundamental to recommencing a roll-out, Vodafone and TPG have not demonstrated that TPG could not obtain a roaming agreement on commercial terms. TPG could never reasonably have expected to come to 5G early, and a failure to roll-out 5G technology early is unlikely to be determinative of TPG's success as an MNO. The difficulties TPG may face in recommencing a roll-out would not be insurmountable, as TPG was effectively addressing these difficulties in its initial roll-out with Huawei. It has not been demonstrated that, absent the merger, TPG would not be willing to roll-out a network. 195 If TPG does roll-out a mobile network in the next five years, it is likely to be a vigorous and effective competitor for price-sensitive customers in metropolitan areas. It has consistently acted as a vigorous and effective competitor in the markets in which it has competed, adopting an aggressive approach to pricing and introducing innovative retail products. It has had some success as an MVNO by adopting similar strategies, including aggressive pricing and promotional offers. It has affirmed its intention to adopt a disruptive MNO strategy in Australia on many occasions. It has incentives to focus on winning market share through aggressive price competition, and the other MNOs have recognised the likelihood that they will be forced to follow to retain customers. 196 Expanding on these contentions, the ACCC contended as follows in relation to the competitiveness of TPG. 197 The ACCC accepted TPG's mobile network would not be of the same quality as those of the other MNOs. Mr Wright's evidence was that the 4G network that was being rolled out by TPG would have been of a lower standard and quality of performance relative to other MNOs in terms of its geographic coverage and consistency of service. He predicted it would only provide coverage to 60% of the Australian population, and would be concentrated in the metropolitan areas of major capital cities. Although it would likely provide satisfactory outdoor coverage both in the CBD and the balance of the small cell area, there would be areas of poor indoor coverage away from the small cell locations, deeper indoors and on upper floors. Coverage consistency was also expected to be variable owing to the antenna design. In-building coverage in CBD areas would be improved by building in-building coverage systems. This requirement was anticipated in TPG's original roll-out, where XXXX XXXXXXX was budgeted over three years for in-building coverage systems. There would also be coverage holes until the roll-out was complete. 198 Similar observations apply to Mr Wright's proposal for how TPG could upgrade its 4G network to a 5G network, although the addition of 5G 'mid-point' cells is likely to provide some additional 5G coverage into buildings near to the small cell locations compared to TPG's ceased 4G network roll-out. 199 The ACCC submitted that TPG was well aware of the limitations of the network TPG was building. Mr Levy's evidence was that from the beginning of the mobile strategy, Mr Teoh told him that TPG's network would not provide consistent or widespread coverage and that the network would have gaps in coverage during the roll-out period. TPG's strategy was to appeal to price-sensitive customers who, for a lower price, would be willing to sacrifice quality. The evidence from a number of MVNO witnesses was that customers would be willing to trade quality for price. 200 In the ACCC's submission, if TPG does roll-out a mobile network in the next five years, it is likely to be a vigorous and effective competitor for price-sensitive consumers in metropolitan areas. 201 To date, TPG has been an effective and successful competitor in markets adjacent to the retail mobile market, adopting an aggressive approach to pricing and introducing innovative retail products. TPG has also had some success as an MVNO, adopting similar strategies including aggressive pricing and promotional offers. 202 TPG's consistent strategy has been to 'lead' the market by introducing services that are innovative and disruptive. TPG has frequently done so by offering products at lower price points than its competitors' products - that is to say, by pricing aggressively. TPG has most recently done so in Singapore, where it has entered as an MNO. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 203 The ACCC contended that TPG affirmed its intention to adopt a similarly disruptive MNO strategy in Australia on many occasions. Consistently with that intention, in May 2018, TPG announced its first mobile offering to the market as an MNO. The product was to be free for TPG customers for the first six months, and would thereafter cost $9.99 until approximately January 2020 (with further increases after that time); it included unlimited data, with the first 1 GB supplied every day to be supplied at 4G speeds; it was to be available in the third or fourth quarter of 2018; and it was to initially provide mobile coverage in the CBD areas and some surrounding suburbs of major Australian cities. In the press release accompanying the announcement, Mr Teoh said that the plan 'signal[led] a new era of competition in the mobile market and [would] undoubtedly bring great benefit to Australian consumers'. Approximately two weeks after the plan was announced, the minutes from the TPG Board meeting record that the plan had 'created quite a stir in the market', and that the Board was confident that it would 'be difficult for incumbents to compete with on price'. 204 Both Mr Teoh and Mr Levy suggested that TPG's initial mobile offering would now be less attractive to customers, in light of 'the availability of … lower ARPU plans … offering significant data inclusions (of up to 10GB) and the full suite of mobile services'. They suggested that TPG would be required to rethink its proposal in order to put forward an offering that would be disruptive. Mr Levy proposed that 'TPG would need to offer a mobile product with data inclusions of around 60GB/month or more in order to replicate an "unlimited" data product vision'. In the ACCC's submission, these claims should be rejected. 205 It was submitted that the analyses that Mr Levy exhibits to his first affidavit demonstrate that, at all material times, TPG's initial mobile offering would have offered substantially more data than any other mobile plan on the market at that price point. As at July 2019, mobile offerings which included 30 GB per month of data were in the range of approximately $30. At that time, amaysim offered 30 GB per month for $30 on a month-to-month plan; Optus and Vodafone offered 35 GB per month for $30 on a pre-paid plan; and Vaya offered 30 GB per month for $44 on a month-to-month plan. In the $10 to $15 plan range, data inclusions were between 1 GB and 3 GB per month. Understood in this light, TPG's proposal - 30 GB per month at 4G LTE speeds, and thereafter unlimited throttled data, first for free, and then for $9.99 per month - still seems to be highly competitive. The evidence of Messrs Baker, Davies and Ward, who are associated with MVNOs, is to similar effect. The ACCC contended that this is unsurprising - XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 206 Understood in light of those same competitor analyses, Mr Levy's suggestion that TPG 'would need to offer a mobile product with data inclusions of around 60GB/month' seems flawed. The ACCC contended that Mr Levy's suggestion is not supported by any analysis - it is pure assertion which is said to be based on his 'monitoring of the market'. However, as at July 2019, plans providing 60 GB per month or more cost at least $50. The ACCC submitted that it does not seem correct to suggest that TPG would presently need to offer this amount of data to compete for price sensitive customers. 207 In respect of the prices that have been announced to the market by Telstra and Optus for 5G products, Mr Levy suggested that TPG's mobile offering would have to compete with Optus' $70 5G home broadband fixed wireless plan. However, the ACCC submitted it is clear that these products are not meaningful alternatives, either on price or product functionality. Mr Teoh also referred to Telstra's 5G mobile phone plan, by which Telstra customers can access 5G for free until 30 June 2020 as part of their paid plan, and for an additional $15 per month after that time. Telstra's $15 for 5 GB plan, referred to by Mr Teoh in cross-examination is a data only plan that offers significantly less data (5 GB against 30 GB) for a higher cost than TPG's offer. 208 As to how TPG would price its plans if it were to enter as an MNO, it was submitted that TPG's incentives would be quite different from those of Telstra, Optus and Vodafone. TPG would likely focus primarily on winning new customers, with little regard for its small existing customer base. It would not need to be concerned about balancing the potential for winning new customers against the margins earned on existing customers. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX. (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX. (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX. 209 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. The ACCC noted that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX. 210 Therefore, the ACCC contended that in circumstances where TPG has: consistently acted as a vigorous and effective competitor in the markets in which it has competed; competitive advantages through not having to support legacy mobile networks; the scope to cross-sell to an established and large customer base of fixed broadband services; an extensive fibre backhaul network to support operations as an MNO; established customer support systems; compared to incumbent MNOs, stronger incentives to set low prices to pursue mobile subscriber growth as they do not have an existing revenue base to protect; and strong incentives to pursue mobile subscriber growth to build scale, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XX, then it is likely that TPG will be a vigorous and effective competitor if it determines to roll-out a 5G upgradeable mobile network with an alternative vendor.

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TPG's current position and the next five years without the merger 215 There is no doubt that for a number of years TPG evinced a strong commitment to rolling out a mobile network. The evidence and chronology of events support the contention of the ACCC that Mr Teoh and TPG were prepared to enter what they then considered a worthwhile venture. I do not accept that at the time they were prepared to 'chance their arm', nor do I think they acted in a foolhardy way at the time. They had a vision, one which they sought to implement, but which had its own difficulties and obstacles which became apparent as the roll-out progressed. 216 The history of events supports this conclusion that TPG had a strong commitment to commence and continue a roll-out of a mobile network from 2016. 217 TPG acquired 3 x 5 MHz of 1800 MHz spectrum in February 2016 for $84.7 million. At the 29 January 2016 TPG Board meeting, the Board expressed the view that '[l]ong-term we have to be in the mobile space - the future is mobile'. Whilst this comment must be put in the context of the time and TPG aspirations at that time, I interpolate that there is no doubt at a general level the statement 'the future is mobile' seems still a reasonable and likely prediction as to the future of telecommunications in Australia. However, mobile in Australia is not the complete future and as far as Mr Teoh and TPG are concerned, there are other options to pursue to which I will come to later in these reasons. 218 Returning then to early 2016, TPG actively pursued the acquisition of the 700 MHz spectrum. In March or April 2016, TPG approached the Commonwealth Government to express an interest in purchasing 2 x 15 MHz of 700 MHz spectrum, being spectrum which remained unsold after the ACMA auction in 2013. In April 2016, Mr Teoh informed the TPG Board that this was 'the best quality spectrum and could cost ~$800m but would be very valuable to the Company'. In August 2016, Mr Teoh wrote to the Assistant Secretary of the Spectrum Branch at the Department of Communications and Arts, offering to license that spectrum for approximately $857 million. In that letter, Mr Teoh informed the Assistant Secretary that he believed it would 'greatly benefit Australian consumers if a fourth player enters the mobile communications market'. The Department did not ultimately accept the offer. 219 Between 26 August 2016 and the commencement of the 700 MHz spectrum auction in April 2017, the TPG Board met a number of times, and discussed the importance of a mobile strategy to TPG. By way of example, on 24 February 2017, Mr Teoh told the TPG Board that the 700 MHz auction was 'a very important opportunity for the Company and a very serious decision for the Board'. Mr Teoh told the Board that 'the mobile market is massive and future industry growth will be driven by mobile', and said that '[t]he size of the initial investment in spectrum and network roll-out will cause some financial pain for a few years and the network roll-out will be a challenging exercise, but if we do it successfully, we will be in a fantastic position in the industry'. On 16 March 2017, the TPG Board discussed 'the strategic importance to the Group of proceeding with the [mobile] strategy', and discussed a bidding limit of $1 billion, although Mr Teoh indicated that the limit 'may need to be higher'. The Board approved a $1 billion bidding limit, recognising that at that price, 'the Group would have an unfunded financial commitment of ~$1.1B over and above its existing debt facilities'. 220 In the course of the 700 MHz spectrum auction, the TPG Board approved increases to the bid limit on two occasions: first, on 5 April 2017, to $1.15 billion, and then, on 6 April 2017, to $1.261 billion. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 221 TPG successfully acquired 2 x 10 MHz of 700 MHz spectrum for the price of $1.26 billion on 6 April 2017. On an 'MHz/pop basis', this was the highest price paid for 700 MHz spectrum anywhere in the world. It was over double the price paid by Telstra and Optus for 700 MHz spectrum in 2013, and by Vodafone for the remaining 700 MHz spectrum in the 2017 auction. 222 It is worth noting that as at April 2017, Mr Teoh considered that no matter the outcome of the 700 MHz spectrum auction, TPG would be spectrum-poor relative to other MNOs. This meant it needed to plan its network to maximise capacity, while maintaining low capex, particularly if it were to be able to make disruptive offers in the marketplace. 223 During the network design process in 2017, through discussions with Mr Hanly, it became clear to Mr Teoh that TPG needed a primarily small cell site network installed on utility poles in contrast to a predominantly macro site network. This would multiply the use of its limited spectrum holdings and increase its network capacity, as well as roll-out its network as fast as possible in a cost effective manner. The Board minutes of 28 April 2017 record that small cells on poles 'could be more cost effective' and 'increases capacity'. The Board minutes of 26 May 2017 record that a small cell approach 'will increase the capacity we can provide'. Mr Wright also said that this was his understanding of why TPG switched to a predominantly small cell site network plan. 224 By September 2017, TPG's strategy had evolved to rolling out a network predominantly comprising small cell sites in metropolitan areas, complemented by a lower number of macro sites. This change in strategy was principally motivated by TPG's need to maximise the capacity it could generate from its limited spectrum holdings. 225 Then returning to April 2017, after TPG successfully acquired 2 x 10 MHz of 700 MHz spectrum, TPG engaged with Macquarie in respect of the capital raising to support its purchase of the spectrum. 226 There is no doubt that TPG made a significant investment in spectrum where it did not have a firm plan as to how its mobile network roll-out would unfold. The proposal that TPG announced to the market on 12 April 2017 was that it would roll-out a network of 2,000 to 2,500 macro cell sites, plus small cell sites, across the country. However, prior to April 2017, Mr Teoh had been concerned that if TPG only used macro sites, then TPG's limited spectrum holdings would mean that it would not have enough network capacity to be competitive over time with other MNOs. Shortly after the completion of the 700 MHz auction, TPG began discussing the merits of deploying a primarily small cell network - a plan that TPG announced to the market in September 2017. Similarly, at the time that TPG committed to purchase the 700 MHz spectrum, TPG had not actually selected a vendor to provide the equipment for its network. I will return to this issue. 227 From April 2017 until the cessation of TPG's roll-out on 29 January 2019, TPG worked through a number of issues that were presented in respect of its network roll-out. 228 As I have said, TPG needed to revise its roll-out plan in relation to the number of macro sites and small cell sites in scope. Then TPG worked with Huawei (a vendor of mobile network technology that designs, manufactures and supplies telecommunications equipment) throughout this process to develop an appropriate technical solution. Even after Huawei provided TPG with a 4G small cell solution, TPG frequently had to tailor the equipment that it intended to install on particular sites in order to meet the requirements of particular sites (including volumetric requirements and requirements imposed by local Councils). On occasions, TPG had to select different small cell sites because of the limitations of a particular site, for example, its maximum height or the equipment already installed at that site. Other issues arose during its network roll-out, including ensuring sufficient power supply at small cell sites, and issues relating to community opposition and complexities with heritage-listed areas. 229 When TPG decided to roll-out its network in 2017, I find that Mr Teoh and TPG did not anticipate the full extent of the roll-out difficulties that they ultimately experienced during 2017 and 2018. TPG did not view these practical difficulties as fatal to its roll-out until the Board's decision on 29 January 2019. However, these difficulties certainly increased the risks associated with the roll-out. TPG's past experience of these difficulties is instructive for what would be involved in any new network roll-out and the risks and delays that might be expected. Mr Teoh said that these issues were among the unsolved problems that deprived TPG of a business case for any new roll-out. 230 In addition, I do not accept that the landscape facing TPG today and the next five years, or the circumstances in which TPG is currently doing business or will do business, or the commitment to rolling out a mobile network, are similar to that existing in April 2017 and following into January 2019. The current difficulties are more problematic, and are obviously viewed in that light by Mr Teoh. 231 The Court has sought to evaluate the facts and the market conditions that are present today and can be reasonably predicted in the future five years. As I have already indicated, the experts, including Mr Smith, recognised the likelihood, nature and timing of any network roll-out that could or would be undertaken by TPG is a factual question. The experts can and did act on certain assumptions. The Court has relied upon the evidence of those operating in the retail mobile market, keeping in mind the focus being on what is commercially realistic. It is true the economist can describe in general terms how a rational business person may act in the future, and to that end refer to various 'objective' matters that may influence the rational business person. In these proceedings, that person is Mr Teoh. Nevertheless, as each of the economists recognised, the Court, in light of all the evidence, including that of market participants and Mr Teoh himself, must make the evaluative judgement. 232 On the important issue of timing, the ACCC in its written submissions set out certain factors it contended remained unchanged from the 2017 position to the current position. These submissions were largely based upon the evidence of Mr Teoh. I will return later to Mr Teoh and his evidence in the context of various matters that need to be assessed. 233 However, I accept that if you look at the position Mr Teoh took in 2017 in deciding to roll-out a retail mobile network with the position now, some of the advantages held by TPG to value the opportunity to become an MNO are still there: TPG's assets and experience, some competitive advantages relative to the existing MNOs, the fact that TPG is not required to support legacy networks and an opportunity to win market share through aggressively priced plans with no existing customer base ARPU to protect. However, this is only one side of the ledger - other considerations impact on any commercial decision that may be made now to roll-out a retail mobile network. 234 Then there is no denying that at a very general level the mobile market presents a significant opportunity to achieve long-term growth. As at April 2017, TPG predicted that with Australia's robust population growth, the mobile market would steadily increase. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 235 However, these are all subject to what Mr Teoh and TPG have in mind for the future, and their assessment of whether they should or are able to take advantage of any of these opportunities. 236 In order to understand Mr Teoh's and the TPG Board's current positions, it is necessary to go back to the decision and the reasons for TPG determining not to continue the roll-out of the mobile network. There has been no suggestion that the basis of the various relevant decisions of the Board were not actually held at the time of each Board decision. 237 The relevant background event was that on 23 August 2018, the Commonwealth Government imposed the Security Guidance. From August 2018, TPG did not order any more equipment from Huawei, although it continued to install what it already had. 238 At its meeting on 29 January 2019, the TPG Board resolved to cease the roll-out of its mobile network in Australia. Mr Hanly presented a paper at that meeting and explained that the Security Guidance meant that TPG's upgrade path to 5G had been blocked. Mr Teoh recommended the Board cease the roll-out because it made no commercial sense to roll-out a 4G network that could not be upgraded to 5G. Following the Board meeting, TPG announced its decision to cease its mobile roll-out to the market. The announcement said that 'a key reason' was that the upgrade path to 5G was blocked. 239 Following the decision on 29 January 2019 to abandon the network roll-out, TPG addressed the accounting implications of that decision. On 26 February 2019, TPG announced to the market that it had no business plan or strategy for using its spectrum licences on a standalone basis and, accordingly, the carrying value of those licences was required to be reassessed. TPG wrote down the value of its spectrum licences by $92 million and wrote off the mobile network capex it had incurred to date of $76 million. 240 Up until the impact of the Security Guidance became clear to Mr Teoh on or about 11 or 12 November 2018, he believed that TPG was likely to be able to roll-out most or all of its network plan. Following this, Mr Teoh asked Mr Hanly to investigate whether there was any alternative technical solution that would provide a 5G upgrade path while using TPG's Huawei 4G network plan. In mid-January 2019, Mr Teoh asked Mr Hanly to contact alternative RAN vendors to attempt to find out whether there was a 5G-upgradeable small cell solution that could be installed on a pole and would meet TPG's technical requirements. Mr Hanly contacted vendors including Nokia and Samsung. 241 In the ASX announcement made by TPG on 29 January 2019, TPG said that it had 'decided to cease the roll-out of its mobile network in Australia'. It said that it had been exploring available strategies to address the impact of the Security Guidance, but had 'reached the conclusion that it does not make commercial sense to invest further shareholder funds … in a network that cannot be upgraded to 5G'. 242 Mr Hanly and his team met with several vendors of network equipment (ie Nokia, Ericsson, Samsung and Airspan) between that time and 29 March 2019. 243 On 29 March 2019, Mr Hanly presented to the TPG Board on the results of his investigations. As at that time, Mr Hanly had engaged primarily with Nokia, Ericsson and Samsung, and had discussed with those vendors whether they could meet TPG's requirements. Mr Hanly's assessment was that 'no vendor could provide, or was indicating an intention to develop, a 5G AAU that could be installed on a utility pole alongside 4G equipment. Accordingly, none could offer TPG an acceptable technical solution'. Other difficulties with a mobile network roll-out were raised before the Board. On that basis, the Board decided that it was 'clear that building a mobile network was not a feasible option'. Mr Teoh recommended that decision to the Board. 244 Mr Banfield advised the TPG Board that the absence of a technical solution rendered consideration of the other risks and challenges of a roll-out 'somewhat irrelevant', but he nonetheless listed the risks that TPG would face were it to roll-out. The risks that Mr Banfield identified were the following: Spectrum constraints • As set out in David Hanly's presentation, the 30MHz of 3.5GHz spectrum that the Group would have on a standalone basis was insufficient to compete effectively with the 5G product offering already launched by Optus. Community resistance to small cells • The rollout of the Group's small cell network in 2018 was hindered by a significant number of instances of community resistance to the installation of small cells in residential streets. • This caused (i) unanticipated delays in the rollout of the network, (ii) gaps in network coverage and (iii) suburbs where council / political intervention has blocked the Group from proceeding with the installation of small cells altogether. • A compelling feature of the original business case was timing, ie being at the forefront of 5G. • Huawei ban delay would leave us years behind Telstra and Optus. • Reduces market opportunity relative to original business case. Reduced market opportunity due to decline in industry ARPUs • ARPUs have declined since 2017 business case. • Reduces ability to differentiate on price. XXXXX XXXX XXXX XXX  XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX.  XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX.  XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXX.  XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XX. Adequacy of borrowing capacity • The Group has insufficient borrowing capacity to fund a mobile network build. Risk of detrimental equity raise • The April-17 equity raise was damaging for shareholder value. • A new equity raise would be extremely challenging in the context of (i) an already failed project, (ii) significant investor scepticism about prospects for a 4th MNO. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX.  XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX. 245 XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XX. 246 I find that this was a final and determinative decision made by the TPG Board (and Mr Teoh) to stop the roll-out of its mobile network on the basis stated in the presentation to the Board. I also find that Mr Teoh and the TPG Board held the view that the building of a mobile network was not a feasible option. Of course, Board decisions can be (depending on the circumstances) rescinded. It may have been that if shortly after 29 March 2019, Mr Hanly came back to the Board with other relevant information, the Board and Mr Teoh may have been more amenable to reconsider their decision. 247 I contrast the position in March 2019 with the present state of affairs. I observe that with the effluxion of time before Mr Teoh would even need to consider changing his mind (ie when the current merger proposal merger is off the table), and in view of the public position taken recently by Mr Teoh, the information now at his disposal as to the potential difficulties with a TPG mobile roll-out, and the position of Telstra and Optus in the marketplace with 5G, any reconsideration in favour of re-starting a roll-out is extremely unlikely. 248 Despite the suggestion of the ACCC to the contrary, I should also indicate that I consider that TPG's decision to cease rolling out a mobile network was genuine, and was not driven by the desire for the proposed merger. 249 This was never directly put to Mr Teoh. Mr Naik rejected this contention. The initial decision announced to the market on 29 January 2019 was catalysed by the implications of the Security Guidance. This occurred some months after the announcement of the proposed merger on 30 August 2018 and some months prior to the ACCC's decision to oppose the merger in May 2019. 250 Mr Naik gave evidence that members of his team were redeployed in September 2018 in order for TPG to focus on delivering as many small cell sites as possible. The Project Pinnacle Weekly Report released on 18 December 2018 indicates that TPG rolled out an increasing number of small cell sites in the successive months from August 2018 to October 2018: from 79 sites per month to 149 sites per month. Mr Naik's evidence was that the subsequent drop in the run rate in November 2018 to 104 sites per month was attributable to the rising community objections, for example in Kooyong. 251 Mr Teoh's evidence was that TPG continued to roll-out its network in this period using existing Huawei equipment that had been purchased. 252 The ACCC referred to an email in support of the suggestion that the proposed merger was the real catalyst for the ceasing of the roll-out. Mr Naik was shown an email from one of his subordinates, Mr Heckenberg which stated: I caught up with Dave Hanly and he has suggested that we stop all work on macrosites, as we are unsure if these will be required post-merger. 253 I do not consider this email shows TPG ceased or slowed down its roll-out on account of the proposed merger. It was rational for TPG to redirect the focus of its roll-out towards assets that could be deployed by TPG as a standalone entity, as well as MergeCo due to the uncertainty arising. 254 The cessation of rolling out a network also meant that particularly since May 2019, TPG sought to reduce staffing costs and headcount related to the mobile deployment. 255 Messrs Teoh, Banfield and Naik gave evidence to this effect: (4) Mr Naik's evidence was that since the 29 January 2019 announcement, TPG has not renewed any contracts for staff responsible for the mobile deployment. (5) Mr Teoh's evidence was that in May 2019 he asked Mr Naik to look at cost reductions. 256 However, I do observe that, after the Board determined on 29 March 2019 that 'building a mobile network was not a feasible option', Mr Hanly and his team continued to engage with alternative vendors. Amongst other things: on 18 April 2019, in the course of ongoing contact between Nokia and TPG about technical solutions, Mr Hanly sent an email to a Nokia staff member saying '[l]ets keep up the momentum', and noting that he wanted to ensure that TPG had 'a good understanding of [Nokia's] offerings'. On 10 July 2019, Mr Ye, who reported to Mr Hanly, requested a meeting with Nokia the following week 'to go through: (a) latest Nokia RAN hardware and feature roadmap, (b) Potential solutions for TPG scenario'; on 10 July 2019, Mr Ye told Samsung that TPG was 'in the process of collecting 3.6 GHz 5G radio product information for [its] internal evaluation'; and throughout that period, TPG was continuing to engage with Ericsson in relation to its 5G solutions. 257 Nevertheless, I do not accept that the communications TPG had with the equipment vendors which had occurred after 29 March 2019, took place or were motivated because TPG remained interested in understanding the solutions that would be available in respect of a potential 5G network upgrade or because it was likely that, absent the merger, TPG would wish to enter the mobile market in the next five years. In addition to referring to these communications, the ACCC submitted that their submission to the contrary was reinforced by Mr Teoh's acceptance that he has 'believed for a very long time that the future of [TPG] is in mobile', and that he 'still believe[s] that'. As I have alluded to already, this comment must be read in context and was not directed to TPG's future in Australia, or its positioning in the retail mobile market. 258 As to Mr Hanly's (and his team's) continued discussions with equipment vendors after the Board's decision of 29 March 2019, I do not consider that was indicative of a continuing willingness on TPG's part to enter as an MNO. Mr Hanly had stated in his affidavit that he continued to talk to vendors after the end of March 2019 because 'I did not receive any instruction from the Board to cease contact with equipment suppliers'. In cross-examination, Mr Teoh and Mr Hanly gave wholly consistent evidence that Mr Teoh had not instructed Mr Hanly to continue these discussions after March 2019. What Mr Hanly did was explicable. Mr Hanly acted in the usual course of his job, and in the express hope of the merger continuing. The vendors confirmed in cross-examination that their discussions with Mr Hanly had, at least in part, concerned the joint venture or MergeCo. Mr Wright explained that network managers have such discussions 'to understand any technology they [vendors] may be bringing to market. So, indeed, I visited Huawei regularly in China'. 259 As I have indicated, I do not consider there to be any inconsistency between Mr Teoh and Mr Hanly on this issue. Mr Hanly was just doing his job to learn of the latest infrastructure and product availability. Mr Teoh as Chairman had his own reasons, including to be better informed. His reference in his evidence to seeing whether 'there's a new solution' must be read in the context of his letter to Mr Sims (to which I will come to), and these proceedings. In any event, no direct attack was made on the credibility of Mr Teoh or Mr Hanly. I see no objective reason not to treat their sworn testimony on this aspect as accurate and a true reflection of their position. Attaching weight to stray comments of a witness, out of context, cannot undermine the proper understanding of the substance of the evidence given by a witness. For Mr Teoh to still believe in the future of mobile is not to be taken as an acceptance that TPG will resurrect itself in that space: it was just an acceptance of an obvious point that he has believed and still believes the future of telecommunications is in mobile, which for him is not just limited to Australia or to his own participation in the Australian market. 260 Then the ACCC relied on a letter dated 10 May 2019 sent from Mr Teoh to Mr Sims. I consider that this letter does not show that TPG was contemplating or even thinking of entering the mobile market. Its context is important. Mr Teoh and his officers (including Mr Hanly) had dealt for several months with the ACCC, in both voluntary meetings and compulsory examinations. Mr Teoh and TPG had just learned that the ACCC had opposed the merger. In addition, through public radio and press releases, Mr Teoh had learned, for the first time, that Mr Sims believed that 'TPG … has the capability to resolve the technical and commercial challenges it is facing' and that Huawei was not a 'monopoly supplier' of the equipment TPG required. The first suggestion could bear upon the Board's decision of January 2019, which had been announced to the market. The second suggestion could bear upon the Board's decision of March 2019. If Mr Sims was correct, Mr Teoh believed each could have been based on a false premise, and wanted further information from Mr Sims. Mr Teoh denied that the statement that information about a solution 'may be of profound significance to the future of TPG' reflected the possibility that he would change his mind. Mr Teoh gave evidence (which I accept) that his own mind was made up that no business case for a new mobile network could be supported. I do not regard the communication with Mr Sims as being a contra indicator to Mr Teoh's view. 261 I now consider the issue of the 5G technology. TPG has emphasised that the window of commercial opportunity for TPG to become an MNO has now passed, because TPG will have missed the period of increased customer contestability associated with being at the forefront of 5G technology. 262 Mr Teoh's evidence concerning the initial roll-out was that 'timing and speed to market was critical to TPG's MNO Strategy', and that '[o]nce TPG had investigated the Huawei solution and the easy 5G upgrade path', he realised that 'TPG could be one of the leaders in 5G'. Nonetheless, it seems clear that TPG would not in fact have had the product 5G to sell into the market for some time. I accept that from August 2016, TPG expected that 5G would be in operation by 2020, but TPG could not have actually introduced a 5G network by this time. 263 In this regard, the ACCC relied upon the financial model prepared by Mr Banfield, based on the roll-out of a 4G mobile network. The ACCC relied upon the fact that the cost of a 5G upgrade was not included in any version of TPG's financial model. However, Mr Banfield said that it was expected that the 5G upgrade would be funded through cash flow generated from TPG's 4G mobile network. Consistently with the instructions provided to him by Mr Teoh, Mr Banfield's financial model assumed that the 4G network would begin to receive cash flow from January 2020. The ACCC contended that the earliest that TPG could have commenced a 5G network roll-out would likely have been 2021, and it likely could not have completed a 5G network roll-out before 2024. 264 The important point made by the ACCC was that as at 10 April 2017, TPG was in fact going to enter the 5G market several years behind Telstra and Optus and nothing has now changed in that regard. Hence it was submitted that TPG has not, at any time, formed a plan as to when it would roll-out a 5G network: it seemed that 5G would become more significant when 5G is widely adopted and TPG sought to expand its capacity with 5G. 265 I accept that TPG even up to and including January 2019 still had no definite plan as to when the roll-out of a 5G network would occur, and an actual roll-out would not have occurred until after that of Telstra and Optus. However, as I have said, TPG expected that 5G would be in operation by 2020. I will return in more detail to this aspect later. 266 However, it is convenient to mention now that in coming to this conclusion I place very little reliance on the financial models referred to a number of times and in different contexts throughout these proceedings by all parties. Each model was based upon various assumptions, many subjective, and the result of each model could be varied (as was demonstrated by Counsel and witnesses) by slight variation in single projected assumptions. 267 As will be seen later in these reasons, Mr Wright's conclusions about the likely quality of TPG's network could have some profound consequences for the financial models which TPG prepared to support its decision to launch a mobile network. In summary, Mr Wright has made clear that TPG's network design would have been incapable of achieving the customer acquisition assumptions envisaged by models created at the time by TPG. 268 As an example of the subjectivity of the financial models, TPG's 10 April 2017 financial model was highly sensitive to changes in the customer acquisition rate. That model assumed that TPG would commence in January 2020 with a customer base of 300,000, and then grow by 60,000 customers every month until November 2026, when TPG assumed it would reach a market share of 15%. 269 Care must be taken in adjusting parameters in a financial model spreadsheet and reaching conclusions of fact. For example, if the customer acquisition rate is modified to 45,000 customers per month, which was the rate used by TPG in all versions of the model before 10 April 2017, then TPG's market share would peak at 11% market share: that change decreases the net present value ('NPV') of the model from $770 million to $23.9 million. 270 Then the model is also highly sensitive to changes in the ARPU assumption. The TPG model assumed that TPG would have an ARPU of $15 per customer per month. If this assumption was reduced to $14, and the customer acquisition rate is changed to 45,000 customers per month, then the NPV of the model is ($169.5 million). Of course, if the customer acquisition rates or ARPU drop further, then the NPV becomes even more significantly negative. 271 Another example of the subjectivity of models arose when Mr Teoh was cross-examined about the version of the model as at 7 April 2017, when the decision was made to proceed with a capital raising, and the final version as at 10 April 2017. Mr Teoh was taken to the 'DCF' tab in the 7 April 2017 version, which showed an NPV of ($288.48) million. Mr Teoh said the discount rate was too high and should be around 8.5% to reflect TPG's weighted average cost of capital ('WACC'). If that change was made, then the NPV becomes around $15 million. TPG's WACC was 8.3%. If that number was used as the discount rate, then the model would show a positive NPV of $30.2 million. The cross-examination by the ACCC on this topic and the approach of Mr Teoh was extensive, but in my view did not undermine Mr Teoh's stated position. If the cross-examination was to simply demonstrate Mr Teoh's fluid approach to decision-making and that Mr Teoh and TPG at that time were very enthusiastic to roll-out the mobile network, I accept that was the position as I have already indicated. 272 Returning then to the 5G path. In addition to densifying its network with small cell sites, TPG understood early that it would need 5G in order to have sufficient network capacity. From as early as 26 August 2016, TPG considered that having 5G would be vital for any mobile network that it would roll-out in Australia. The minutes of its Board meeting that day state: 'In the long-term, mobile will become very important. 5G will be in operation by 2020 and will be capable of threatening fixed business. It is vital therefore that we focus on investing in mobile infrastructure'. 273 Also during the network design process, Mr Teoh came to understand that TPG's network would need an upgrade path to 5G, because 5G would significantly increase network capacity. Mr Hanly gave evidence that Mr Teoh said to him around or shortly after April 2017 that 'small cell sites were the way of the future because 5G technology envisages using higher spectrum frequencies, which require cell sites to be placed closer together due to inferior propagation of radio signals at those higher frequencies'. 274 The upgrade path that Mr Teoh had in mind was that TPG would deploy centralised baseband units ('cloud BBUs') that could be upgraded to 5G with software by adding a '5G card' to the BBU, and that TPG would install Massive MIMO 5G AAUs on the utility poles alongside the 4G equipment. This ultimately would include 16T16R AAUs with Massive MIMO technology, which would substantially increase TPG's network capacity. 275 The importance of 5G to maximising TPG's network capacity was referred to in TPG's 28 April 2017 Board minutes, which record: 'Deploying small cells on poles would reduce the number of macro sites we need to deploy and could be more cost effective. Maximising use of small cells is also the right approach as it increases capacity and is the right platform for 5G'. Likewise, TPG's Board minutes on 26 May 2017 record: 'We are trying to adopt a small cell approach in the most densely populated areas for two reasons: a) this is 5G architecture - bringing service closer to customers; and b) it will increase the capacity we can provide'. 276 As at August 2017, the 5G upgrade path was mentioned to TPG's bankers. A draft business strategy update received from NAB on 11 August 2017 stated: Upgrade path to 5G - a path to the Future. An important component of TPG's network planning has been an easy and cost-effective upgrade path to 5G once the technology becomes available Australia (expected to be in 2020). Whilst TPG would require additional spectrum to launch a 5G network, it is important to note that their radio equipment (small and macro cells) are readily upgradeable to 5G, with minimal configuration and cost required to enable 5G services. 277 TPG's 2017 Full Year Results presentation to the ASX on 19 September 2017, shortly before TPG selected Huawei as its RAN equipment vendor, stated: A higher density of small cell sites will be used for the initial 4G LTE rollout and will also provide key infrastructure assets for the longer term 5G evolution. 278 The necessity for a clear upgrade path is now more important in the light of Mr Wright's analysis of TPG's network design. Under Mr Wright's analysis, TPG would have to be able to deploy a 5G small cell solution by 2023, otherwise it will run out of capacity. This is the premise of Mr Wright's '5G Midpoint Network'. Mr Wright agreed that to deploy the 5G Midpoint Network, TPG would need to have a viable 5G small cell solution, an appropriate existing utility pole at each midpoint, planning approval and compliance with the electromagnetic energy ('EME') regulations. Mr Wright agreed with the following proposition about the commercial uncertainty facing TPG in deciding to deploy the 5G Midpoint Network: Do you agree, Mr Wright, that relying on your alternative approach today, TPG would need to launch its network knowing it would run out of capacity in four years but without knowing if it has a viable means of addressing that problem?---If they couldn't negotiate a contract at day one that guaranteed it, yes. 279 This increases the need of having a viable 5G small cell solution that the TPG Board could be confident in backing now. If it did not, it would effectively be rolling out a network which it would know would run out of capacity in 2023. 280 Mr Teoh gave evidence that although Huawei did not yet have Massive MIMO as at November 2017 when Huawei was selected, he knew that Huawei's cloud BBU could be upgraded to 5G and that Massive MIMO could be attached to it. In that regard, he recalled attending a Huawei presentation in Shenzhen in September 2017 during which Huawei presented on 5G technology including Massive MIMO. I accept that enabling TPG to put 5G on a small cell with Massive MIMO was an important factor in Mr Teoh selecting Huawei. Mr Teoh thought that Huawei could supply this technology. 281 Mr Teoh's evidence as to why he chose Huawei should be accepted, and is consistent with TPG's earlier contemporaneous documents. It was also consistent with TPG's internal documents after it selected Huawei as its RAN equipment vendor. A November 2017 Board presentation stated '[t]echnology vendor selected: Huawei' and '[n]etwork upgradeable to 5G based on site access, fibre and power'. Likewise, TPG's half year results dated 20 March 2018 stated '[h]igh density of small cell sites and deployment of Cloud RAN will provide a platform for 5G services'. Further, although Mr Hanly agreed that Huawei had not told him that it could supply a 5G AAU with Massive MIMO as at November 2017, it was not put to him that a 5G upgrade path was unimportant. 282 One other matter to mention. When TPG rolled out fibre to the poles for its 4G sites, it laid an extra fibre pair for 5G. Mr Teoh emailed Mr Naik on 2 November 2017 to remind him that '[Mr Hanly] and I discussed yesterday to leave about 1m gap for future 5G antennas'. Mr Naik's update to the TPG Board in November 2017 recorded: 'Network upgradeable to 5G based on site access, fibre and power'. 283 Of course, it was clear that the entire network would not initially be '5G capable'. TPG's business plan was to build a 4G network over three years which could be upgraded to 5G after that, once 5G was present in the market. 284 The original idea was for TPG to roll-out a predominantly small cell site 4G network, complemented by a smaller number of macro sites, with provision for upgrading the network to 5G once Huawei 5G equipment became available. 285 As I mentioned, on 23 August 2018, the Federal Government issued a media release concerning security guidance for 5G mobile networks in Australia. TPG did not initially appreciate that it would not be able to upgrade its network to 5G using Huawei RAN equipment, or operate an NSA network using Huawei 4G RAN equipment, as it had intended. That became apparent in November 2018 when Mr Hanly met with representatives of the Federal Government's Critical Infrastructure Group. 286 As I have also mentioned, in mid-January 2019, after Mr Hanly and his team had investigated possible solutions to the Security Guidance that retained Huawei 4G equipment, Mr Teoh understood that the Security Guidance meant that TPG's path to upgrading its planned 4G network using Huawei equipment to 5G was blocked. The effect of the Security Guidance was that TPG could not use any Huawei 4G or 5G RAN equipment as part of an NSA network. TPG could not deploy a 5G network (or a 5G-upgradeable 4G network) using Huawei equipment. 287 This meant that TPG had three choices: to roll-out a 4G network using Huawei equipment that could never be upgraded to 5G; to abandon the roll-out; or to start a new roll-out from scratch using replacement equipment (if available). 288 However, TPG commercially incurring the cost of rolling out Huawei 4G RAN equipment if it could not be upgraded to 5G would not have been a rational business decision. Nor would it have been a rational business decision to roll-out the 4G network with Huawei equipment and later roll-out a separate SA network using non-Huawei equipment, with the added cost and complexity of operating two networks. TPG dismissed this as an option in mid-January 2019. Mr Bromhead, whom the ACCC called from Ericsson, agreed it would be impractical to install an SA network in Australia at this stage. 289 Accordingly, the Security Guidance deprived TPG of an upgrade path to 5G using Huawei equipment, which meant that as at 25 January 2019, TPG had 'no other option' but to cease rolling out its network. 290 This need for 5G remains true, so accordingly, absent a technical solution for a 5G upgrade path, or the Security Guidance being reversed, TPG would not roll-out a mobile network. This is the reason the Court needs to consider whether there are other equipment vendors that can fill the void. 291 However, before going to this topic, I make some further observations on the 5G path. 292 The precise details of an upgrade path with Huawei to a Massive MIMO 5G solution were not finally resolved, but it was not only on a product roadmap; it was being developed by a well known vendor to TPG, and Huawei had indicated that it was going to be ready by late 2019. Obviously, this has not occurred as XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX. 293 I note that a 16T16R AAU is Massive MIMO. The Massive MIMO offered by a 16T16R AAU is not as massive as the Massive MIMO offered by a 32T32R AAU or a 64T64R AAU. TPG had decided to focus on a 16T16R because it was the largest and most powerful unit apt to fit on a small cell site, such as a utility pole: with the spatial multiplexing and Massive MIMO, it is far superior to any traditional passive solution (I will return to the technical features of 16T16R AAUs later). Then, TPG expected that the Huawei 5G AAU was going to be capable of vertical beamforming. I will come to alternative vendors later, but TPG has consistently requested a 5G AAU from Nokia and Ericsson that was capable of both horizontal and vertical beamforming. It would be surprising if the unit custom designed for use in dense urban environments did not have this feature. Further, from the image of the Huawei 16T16R AAU, Professor Björnson concluded that the antenna elements were distributed both horizontally and vertically, and that it would likely be capable of both horizontal and vertical beamforming. Vertical beamforming brings a benefit where there are buildings that go up in height, such as in dense urban environments, because a device capable of vertical beamforming can send beams up and send beams down. 294 There were going to be some volumetric challenges at certain utility pole sites even with the very small Huawei 5G AAU. There is an enormous variation in the volume of different poles. Nevertheless, the Huawei 5G AAU device was going to be capable of deployment on a substantial majority of poles. It was a problem that could have been managed if there were some poles where the unit could not be deployed, depending on which antenna was used and whether an enclosure was used. 295 It is important to also stress that TPG had a very good working relationship with Huawei, which it no longer has or will have in Australia. I accept that a good working relationship is vital between an operator and an equipment vendor. All relevant witnesses accepted that the relationship between a supplier and an operator is critical. I just mention now that in contrast with its decade-long dealings with Huawei, TPG has no existing relationship with Ericsson, and a limited one with Nokia, the potential new vendors of equipment. 296 That TPG had a long-standing relationship with Huawei was attested to by the witnesses from Huawei called by TPG (which evidence I accept), namely Messrs Wang, Jiang and Chao. 297 Similarly, Telstra has had a relationship with Ericsson for over many years. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXX. 298 However, a consequence of Ericsson's close relationship with Telstra is that it is more difficult for others (such as TPG) to work with it. 299 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XX. So too is the fact that there is no existing commercial relationship between TPG and Ericsson and Ericsson does not have any direct knowledge of TPG's current infrastructure. 300 It is now important to consider potential vendors that TPG could go to in light of TPG's current position, and the need for the 5G upgrade path. 301 I provide this summary of my findings and conclusion on the issue of whether TPG lacks a business case because no other vendor can provide a 5G upgrade path. This provides an overview of the detailed submissions and evidence on this issue. It is important to understand the technical requirements, some of which I have mentioned previously, but need to be put in the context now of TPG's future options. 302 The design of TPG's mobile network adopted a structure that was highly unusual relative to the networks of other MNOs, which networks utilise traditional macro cell-based networks that are complemented by a smaller number of small cell sites. Small cell sites are base stations located on poles, street furniture or other lower structures, as opposed to macro cells which are typically located on the rooftop or sides of buildings, towers and other elevated structures. Small cell sites typically carry lighter, smaller and less high-powered equipment than macro cells, which lowers the capacity and coverage that can be provided through a small cell site as compared to a macro cell. 303 In contrast to macro cell-based networks, TPG's network design comprised a network predominantly made up of small cell sites using low band spectrum and high output power, complemented by a smaller number of macro cells, making it highly unusual and perhaps even unique. I will return to the matter of TPG's unique system in more detail later. 304 TPG adopted the unusual network design for two reasons: (1) it considered that the use of small cells was '5G architecture' and (2) due to its limited spectrum holdings relative to other MNOs. 305 The source of much contention in these proceedings concerned the design and architecture of TPG's 5G RAN, and less so, its 4G RAN. TPG planned to deploy an initial 4G mobile network that would provide key infrastructure assets to accommodate an upgrade to an NSA network. 306 TPG's small cell 4G RAN network design involved the deployment of: (1) two Huawei RRUs (one operating on 700 MHz spectrum, the other operating on 2.6 GHz spectrum) with two passive antennas, a power supply unit, enclosure and cabling on each small cell site; and (2) Huawei cloud BBUs housed in 'BBU hotels' at remote locations from the utility poles and that control and manage interference between a number of small cell sites. 307 As to the 5G RAN, and as I have briefly mentioned, TPG's strategy envisaged that it would: (1) software-upgrade the Huawei RRUs operating on 700 MHz spectrum to support 5G technologies and communicate with 5G mobile devices using 700 MHz spectrum; (2) deploy two Huawei Massive MIMO 5G AAUs operating on 3.6 GHz spectrum on the utility poles alongside the 4G equipment. This, in particular, would include 16T16R AAUs with Massive MIMO technology, capable of horizontal and vertical beamforming; and (3) install '5G cards' into the spare slots on the existing Huawei cloud BBUs to enable the BBUs to support 5G technologies and to communicate with the AAUs installed on utility poles. Once deployed, this equipment would have allowed TPG to operate an NSA network. 308 As I have mentioned, given TPG's limited spectrum holdings, it was important not only that it could upgrade to a 5G service, but that it could achieve the increased capacity gain associated with Massive MIMO rather than a traditional passive solution. Compared to the use of a passive antenna, an AAU will generally have increased signal strength, and overall increased performance. If an AAU is set up correctly, it is more apt to maximise capacity and coverage than a passive antenna. For a small cell network, the only unit that is small enough to be installed on a utility pole with Massive MIMO technology capability is a 16T16R AAU. 309 Massive MIMO allows for antenna arrays from 16T16R and upwards, which facilitates a potentially dramatic increase in spectral efficiency. While it is a potentially dramatic increase because the technology is still emerging, all of the network operators with 4G networks are augmenting them to have 5G capability. 310 Massive MIMO seeks to separate several radio beams and then steer them towards users. This is sometimes referred to as 'spatial multiplexing'. As the beams emitted by a Massive MIMO device are spatially separated, the same spectrum may be re-used by each beam. This has the effect of multiplying the spectral efficiency and thus the capacity of each site that employs Massive MIMO technology. 311 TPG would only be able to achieve the capacity gains associated with Massive MIMO through the deployment of a suitable AAU. For this reason, TPG regarded a passive solution for 5G as unacceptable. 312 Over the course of approximately two years, TPG developed its MNO strategy, planned its mobile network and began deployment. It completed its radio frequency network design based on Huawei equipment. 313 TPG spent approximately one year deploying its mobile network. For the RAN, TPG had installed Huawei 4G small cell equipment on utility poles at 924 sites nationally, of which approximately 400 sites are 'live', meaning that the small cell site equipment is installed, connected to power and fibre and ready to be integrated with the core network. If TPG had completed the roll-out of its planned network, it would have deployed approximately 4,863 small cell sites and 630 macro cells. 314 On 9 May 2018, TPG announced that it expected to begin trials of its 4G mobile network and offer trial plans in particular metropolitan suburbs in the third or fourth quarter of 2018. However, TPG never launched the trials announced in May 2018. During 2018, there were delays in the roll-out and big gaps in TPG's coverage, and in January 2019, TPG decided to cease its roll-out due to the Security Guidance. 315 At the time TPG ceased the roll-out, it was at least several months behind schedule. Negotiating with utilities for access arrangements to utility poles had been slower than expected, and TPG had experienced unexpectedly high levels of community and political opposition to the roll-out of small cell sites. TPG also made minimal progress on deploying macro cells. 316 No sector of TPG's mobile network was complete at the time it ceased the roll-out. 317 As to the RAN equipment TPG had obtained from Huawei, at the time TPG ceased the roll-out, such equipment included (among other things), RRUs (with one operating on 700 MHz spectrum and another on 2.6 GHz spectrum), power units, passive antennas and a cloud RAN solution. 318 At the time TPG had ceased its mobile network construction, Huawei had not provided TPG with a 16T16R AAU. Huawei was customising a 16T16R AAU capable of horizontal and vertical beamforming, and with a volume of 10 litres and a power output of 40 watts so that it was small enough to be suitable for installation on a utility pole alongside Huawei's 4G RAN equipment. 319 In early 2018, Huawei advised TPG that it could supply a Huawei 5G AAU with Massive MIMO that could be installed on the same utility pole containing Huawei 4G RAN equipment. By the time TPG ceased the roll-out of its network, a prototype Huawei 5G AAU device existed and Huawei had made a commitment to TPG that it would be ready by the fourth quarter of 2019, subject to any delays caused by additional customisation requirements. 320 The precise details of the Huawei Massive MIMO 5G AAU were not finally resolved, but it was not only on a product roadmap and, as I have mentioned, was being developed by a RAN equipment provider with which TPG had a strong business relationship. 321 It is common ground in this proceeding that TPG cannot deploy a 5G network (or a 5G-upgradeable 4G network) using Huawei equipment. This is because the 5G RAN equipment designed, manufactured and supplied by one RAN equipment vendor is proprietary and not currently designed to be interoperable, and is not currently interoperable at the radio base station level with the 5G technology of another vendor when used on the same sites in the same mobile network. The 5G RAN equipment designed, manufactured and supplied by one RAN equipment vendor is also not interoperable with the 4G network equipment of another vendor. For example, a 5G AAU of one vendor cannot interoperate with a 4G BBU of another vendor. Given the above and as a consequence of the Security Guidance, TPG is unable to use any Huawei 4G or 5G RAN equipment to build an NSA network. Were TPG to proceed with the roll-out of an NSA network, it would need to replace all Huawei RAN equipment with the equipment of another vendor (to the extent such equipment is available). The question of whether such equipment is available is a matter of contention between TPG and the ACCC. 322 As to the availability of 4G RAN equipment, there does not appear to be a serious question as to whether a non-Huawei equipment vendor can provide TPG with the necessary equipment. Mr Hanly informed the TPG Board on 29 March 2019 that both Nokia and Ericsson may be able to provide suitable replacement 4G RRUs and BBUs for TPG's 4G mobile network. 323 As to the availability of a suitable technical solution to allow TPG to recommence rolling out a predominantly small cell 4G network with a 5G upgrade path, I accept TPG's evidence that no alternative vendor currently has a suitable 5G upgrade path. TPG's position primarily rests upon the absence of a suitable 5G AAU from an alternative vendor. 324 Around the time of the Security Guidance, the commercial availability of a Huawei 16T16R AAU suitable for TPG's small cell network was close to fruition, notwithstanding that the end product may have required changes that compromised certain of its features and may not have been suitable for all small cell sites in TPG's network. However, as TPG has done in the past, I do not doubt that it would have worked with Huawei to find solutions to any such problems. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 325 There is also generally a lack of demand for 16T16R AAUs because MNOs with traditional macro cell network architecture are more focussed on achieving the even greater capacity gains achieved by using 32T32R or 64T64R AAUs, which due to their size are not suitable for deployment at small cell sites containing 4G RAN equipment. The lack of demand for a 16T16R, coupled with the absence of a close relationship between TPG and alternative vendors, could materially impact the timing of a 16T16R being made available to TPG for commercial use. Even with the current pace of 5G innovation, a 5G 16T16R AAU of similar dimensions, power and performance to the planned Huawei 16T16R AAU may not become available from alternative vendors in the next five years. 326 I accept TPG's evidence that the other potential 5G solutions the ACCC highlighted and which are offered by Ericsson and Nokia, are not suitable for TPG's network design. 327 Ericsson's currently available solutions, namely, the 'Ericsson 8823' and 'Ericsson 4422' are passive solutions that are not capable of Massive MIMO and are therefore not suited to TPG's network design, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX. 328 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX. 329 Nevertheless, I do accept that TPG may not need to roll-out a 16T16R AAU now. I observe that 5G technology is likely to evolve rapidly and that given the current pace of 5G innovation, it is possible that a 16T16R AAU of similar specifications to the Huawei AAU will become available from other vendors. I can put it no higher than possible. However, in light of the circumstances set out above, I do not consider that it would be commercially sensible for TPG to proceed with a roll-out without greater certainty that its planned network design will be achievable within a reasonable period of time. 330 Finally, I do not accept the ACCC's submission that the level of certainty that TPG now says it requires as to a viable 5G solution is at odds with what TPG required during its initial network roll-out. This is because the landscape facing TPG today, the circumstances in which TPG is currently doing business, and its commitment to rolling out a mobile network is not in any way similar to that existing in April 2017, when TPG announced to the market its intention of doing so. In addition, the roll-out of a new network will require additional and unplanned financial investment and will necessarily be delayed (a matter to which I will come). 331 Further, it is worth recalling this fact. At the time of trial, some months after TPG ceased its roll-out, and more than two years after TPG's original decision to commence that roll-out, no other vendor has emerged with a solution that would allow TPG to upgrade to 5G with the 5G RAN equipment installed alongside 4G RAN equipment on the same utility pole. 332 This is despite further engagement between TPG and potential equipment vendors in relation to equipment that might be used by TPG, by the joint venture with Vodafone or by MergeCo. 333 Even if suitable replacement equipment became available (and this is not currently the case), it would be necessary to test whether such equipment provides similar coverage and capacity to the Huawei devices, not only to meet TPG's requirements, but also to avoid potentially lengthy radio frequency redesign of the network. 334 I do not accept that it is now rational to expect TPG to roll-out a 4G network without knowing whether there is a 5G upgrade path with a vendor it selects.

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TPG system is unique 340 It is important to recall that TPG's system is very different to others and is possibly unique when considering the challenges facing TPG with a future roll-out. This introduced and does present peculiar difficulties. Indeed, Professor Björnson, expressed the opinion that it was highly risky and that, if asked, he would have advised against using such a system. 341 I have mentioned these already, but the features that made the proposed network unique were as follows: (1) The use of small cells as the backbone of the network rather than as a means of adding capacity in areas of high demand. (2) This extensive use of small cells led to another feature: in order to provide coverage and capacity in its network, TPG was deploying low band spectrum at its small cell sites. (3) TPG had intended to use relatively high powered equipment more usually deployed at macro cell sites at its small cell sites. 342 The 700 MHz band was to be used in connection with TPG's 4G service and its 5G services once the network had been upgraded. The advantage of using low band spectrum at a high power output is that it provides effective coverage given its superior propagation, but the disadvantage is that it creates problems with interference between adjacent cells. 343 This interference needs to be managed using proprietary tools provided by equipment providers. Managing interference between radio cells is fundamental to the operation of a mobile network. Interference management is challenging in both 4G and 5G. It is important to manage interference; it can result in reduced capacity, manifesting as a combination of call or transmission dropouts and lower data transmission speeds. 344 If radios are at a low elevation (as they were in TPG's proposed network), it is important to manage the interference because it all turns into 'radio pea soup' if it all gets too close together. 345 Both the closeness of the sites in TPG's proposed network, and the strong propagation characteristics of low band radio signals cause significantly more interference than would have to be managed in a traditional macro network. 346 In addition, the use of small cell sites presents deployment challenges because small cell sites mounted on utility poles have particularly stringent limitations in terms of volume, weight, power consumption, and heat dissipation, which limit the amount and power of the equipment that can be deployed on each pole. These limitations include the volumetric limits of the Telecommunications (Low-impact Facilities) Determination 2018 (Cth) and other requirements of State governments and utility pole owners. 347 There is also the need to undertake laboratory simulation and field testing to determine the effectiveness of these features and, on the basis of that testing, to determine where small cell sites are to be located. This is referred to as the 'radio frequency design' ('RF design') of the network. Differences in performance can result in the need to undertake RF re-design - for example, deploying RAN equipment on a different utility pole. This is an iterative process as moving the location of one pole will likely have knock-on effects on the location of other sites. 348 This is particularly so in the case of small cell sites which are more sensitive, and which will change in performance depending on where they are located and the clutter and topography surrounding the site. A small cell network leads to greater coverage uncertainty in urban environments, and small cell networks require more of a balance to be struck between form factor, antenna size and capacity. 349 As I have said, TPG adopted this structure because it has limited spectrum holdings. As a result, TPG may only increase capacity in its network either by adding sites or increasing the spectral efficiency of its deployed equipment. If an MNO has more spectrum in absolute terms, it will deliver high speeds and greater capacity, although the extent of the improvement in speed and capacity will also depend on the efficiency of its equipment, the number of sites and the number of users making use of the network at a given time. If an MNO has limited spectrum holdings, single-user peak data rates will be poor, regardless of the number of users on the network, and single-user peak data rates are important to end-user experience. 350 On the issue of spectrum (to which I will return in more detail), XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXX. Spectrum is a key strategic asset because it enables an MNO to increase its existing bandwidth, which translates to increased capacity and faster and more reliable speeds for customers. It is absolute spectrum holdings that matter because that is what limits what an MNO can offer. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX.

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Mr Teoh 351 It is convenient at this stage to outline Mr Teoh's evidence and other evidence which supports Mr Teoh's own position relevant to the future of TPG and the 5G path. The supporting evidence assists in the Court assessing objectively the likelihood of Mr Teoh and the TPG Board changing their minds to roll-out the mobile network. 352 Mr Teoh's evidence was that, before TPG could even consider rolling out a mobile network absent the merger, there must be a new and different business plan. He said that before he would recommend to the TPG Board that it should invest in rolling out a mobile network again, he would want to see a model that he had confidence in and would have to have a positive NPV. He also said it was important that TPG could fund the cost of the roll-out and had sufficient spectrum to be competitive with the significant amounts of spectrum held by Telstra and Optus. Mr Teoh said it would be important to understand the market opportunity and whether TPG could compete in the marketplace. He would want to make sure that that TPG would be able to compete in four or five years' time, and would not be selling an obsolete product (ie 4G) when other MNOs are selling 5G. 353 Unlike the ACCC, I do not view Mr Teoh's approach to decision-making now as significantly different to when he decided in 2017 to roll-out a retail mobile network. 354 As I have alluded to, it is wrong to assume that TPG's assessment of the mobile strategy was contained exclusively in the financial model prepared by Mr Banfield. I have already made some observations on the utility of financial models. Mr Teoh did not rely for his decision-making on the financial model prepared by Mr Banfield. The financial model was a tool or a framework to assist Mr Teoh and the TPG Board to reach a commercial decision in April 2017. As Mr Foster said in his evidence concerning the model, '[s]o the business case, in other words, represents the reasons why TPG believed the entry as an MNO would be value enhancing to its shareholders. Now, that is separated from the financial model. The financial model is a tool which supports the business case'. 355 There was a business case in 2017. In fact, TPG's decision-making process last time seems to support the view that it is extremely unlikely TPG would reverse its January 2019 decision absent a proper business case (which now does not exist). 356 It is to be recalled that on 12 April 2017, following its successful bid for 700 MHz spectrum, TPG announced a capital raising and that it was intending to roll-out a mobile network with approximately 2,000 to 2,500 macro sites plus small cell sites across Australia. There was an analysis conducted by TPG before the decision was made, and it was supported by a business plan prepared within TPG. 357 Mr Teoh began formulating a strategy for TPG becoming an MNO by mid-2016. He did that through discussions with key TPG executives such as Messrs Hanly, Naik, Levy, Pachos and Banfield. Much of it occurred through meetings or telephone discussions that were not recorded in written documents. I do not take the absence of written records to be indicative of any lack of rigour or analysis on TPG's part. 358 Using the inputs he obtained from speaking with his key executives, Mr Teoh worked with Mr Banfield in early 2017 to prepare a business model. Although the model's primary purpose was to enable the Board to understand the debt and equity funding implications of acquiring the 700 MHz spectrum, Mr Teoh also said that it had to be presented to the Board to justify the purchase itself. 359 Mr Teoh consistently maintained that the NPV consequences mattered to him and the Board. Further, notwithstanding that the NPV in the version of the model put to the Board on 7 April 2019 was negative, Mr Teoh rejected the notion that the NPV did not matter to him. The discount rate used in the model was 10%, but Mr Teoh knew at the time that if TPG's WACC of approximately 8.5% were used, the NPV was neutral. I find that this was the basis Mr Teoh proceeded in arriving at his decision. 360 As at April 2017, Mr Teoh was confident in the business plan he had adopted and progressed. He said he thought that TPG had a 'good business case' for spending $1.261 billion on the 700 MHz spectrum. I accept this was his view. 361 Further, as I have said, I do not assume that TPG - and its investors - would blindly replicate previous decisions, oblivious to changes in the market since, and the lessons of its attempt to roll-out a network. 362 Returning to Mr Teoh's evidence, he emphasised that, to be viable as an MNO, it was necessary for TPG to be able to compete with Optus and Telstra. He saw the market as moving to 5G, and he did not want to spend money on 4G, 'an obsolete product' when 'the market is a 5G market'. Mr Teoh saw the lack of 5G spectrum available to TPG as an impediment to it being able to compete with Optus and Telstra, particularly as consumer demand for capacity and speed increase over the next three to five years. 363 Mr Teoh referred to Telstra's recent announcement of a $15 per month plan for 'endless' data, with 5 GB of data at uncapped speeds and thereafter throttled to 1.5 Mbps (ie faster than TPG). This plan also offers free access to Telstra's 5G network until 30 June 2020. Mr Teoh did not think that TPG could be competitive with an offer like that. As he pointed out, TPG has 'nothing today' and 'even [if] we got it done in [a] few years' time', TPG's network would 'have a lot of coverage holes' with poor or non-existent in-building coverage. Mr Teoh considered whether a customer is going to buy this plan from Telstra or a plan from TPG when its initial price had increased to $15, and stated '[w]e don't have a business plan'. Mr Teoh regarded the new Telstra product and what TPG planned as 'the same product', but that TPG would not have the quality of service for a long time that would make TPG's product comparable to that of Telstra - '[w]e don't have that quality'. 364 The presence of the Telstra product at $15 per month would have significance for Mr Teoh. If a consumer can receive a $15 'endless' data-only product from Telstra, with its vastly superior network, no rational consumer would take such a product from TPG. It is doubtful whether TPG's offer of 1 GB per day would be sufficient to persuade 60,000 customers each month to subscribe to its network. Given the evidence of the value to consumers of coverage, which I referred to earlier, the presence of a product such as Telstra's, coupled with the increased data available from all MNOs and MVNOs, raises at least doubt even as to the commercial viability of the original decision to roll-out a network. 365 Mr Teoh also referred to Optus' new 5G wireless broadband plans, which offer unlimited data for $70 per month at a guaranteed minimum speed of 50 megabytes per second. He said that with 'our [TPG's] limited spectrum we can't even offer that. … [H]ow can we compete? We can't'. Mr Teoh referred to this plan to emphasise that to compete 'even today is hard, let alone in three, four, five years' time'. Mr Teoh stressed that, regardless of the Security Guidance, TPG does not have enough 3.6 GHz spectrum to effectively compete with Telstra and Optus on 5G. Mr Teoh said that TPG's position today is different from April 2017. TPG has a deteriorating balance sheet, its core business margin is coming down very rapidly and its debt is very high. Mr Teoh said that the original plan was based on significant debt peaking in early 2020, with mobile revenue coming in from that time to pay down the debt. 366 It was put to Mr Teoh that the increase in competition in the market would not have caused TPG to stop rolling out its network, and that without the Security Guidance, TPG would have continued its roll-out. Mr Teoh agreed with those propositions. However, Mr Teoh emphasised that the market is 'getting very competitive … [e]xtremely competitive'. As Mr Teoh stated, the increase in competition in the market means that TPG would no longer have a viable business plan to support such a decision. He said that 'now we [have] lost valuable time and then the market [has] change[d]'. 367 Mr Teoh gave evidence that from mid-2016, he considered that TPG's entry as an MNO would need to be 'disruptive' to be successful. Relevant to forming that view was the fact that TPG's market segment for its MVNO customers was price-sensitive and Mr Teoh's perception that a high data inclusion was very important to attracting customers. He said that, at the time in 2017, TPG thought it could be disruptive by offering customers high data allowances at low monthly prices, such as $15. 368 Mr Teoh discussed these views at the time with TPG's Chief Operating Officer, Mr Levy, who has over 14 years' experience in managing consumer product offerings in the retail mobile market. Mr Levy said that as at late 2016 or early 2017, he believed that TPG needed to offer a product that would 'create a stir in the market' if TPG were to have an effective mobile strategy. This meant offering mobile plans with 'no lock-in' contracts, lower prices, and higher data inclusions than people were used to. In part this was necessary to compensate for the fact that TPG's network would have limitations, such as coverage gaps, potential inability to support certain Apple features, and would lack voice and text functionality. 369 By May 2018, TPG considered that there was a strong opportunity to differentiate itself by offering 'unlimited' data plans to retail mobile customers which, at that time, TPG expected to result in less than 10 GB of actual usage per customer per month. Accordingly, on 9 May 2018, TPG announced that it would be offering a $9.99 'unlimited' mobile data plan that would be free for the first six months, with the first one gigabyte per day supplied at 4G speeds and thereafter capped at one megabit per second. 370 Mr Teoh also considered that TPG needed 5G because he perceived that 5G would be the 'leading product in the marketing and selling of mobile services', and that offering a disruptive product with only 4G would be 'very challenging'. In around July 2017, Mr Teoh formed the view that TPG could be 'one of the earliest' MNOs to have 5G. As I have indicated already, he formed this view because Huawei told TPG that it could supply it with a 4G cloud RAN solution that would be upgradeable to 5G. 371 In the light of this information, Mr Teoh continued to hold the view that TPG might be one of the earliest 5G providers in the marketplace, possibly rolling out 5G in 2020. Mr Teoh agreed that TPG did not have any 5G spectrum at that time, but thought that it was possible TPG would win some 5G spectrum in the auction scheduled for the end of 2018. While TPG had not carried out any radio frequency design work for a 5G network, it did design its infrastructure to include additional fibre connections to its sites to facilitate 5G. 372 Looking at competitors, they also discussed the 5G strategy as important to the future market. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX. (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX. 373 I consider that TPG has lost any opportunity to be an (not the) early mover to 5G. Telstra and Optus have already launched 5G and are heavily promoting 5G products in the marketplace. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XX. 374 At the point when mobile technology is transitioning between generations, there is increased contestability, market share shifts and an opportunity to win customers. The opportunity to be first in market perception will be lost as 5G becomes more widely available. This view was confirmed in the evidence of Vodafone's CEO, Mr Berroeta, as well as representatives of MVNOs called as witnesses by the ACCC, Exetel and Macquarie Telecom. 375 As just indicated, Telstra and Optus have started to offer and widely advertise 5G services and 5G devices. Telstra in particular, is educating consumers about 5G. Even if TPG were to reconsider now its decision to launch a mobile network and even if it found a technical solution, it would be well behind others in offering a 5G service to consumers. 376 Mr Teoh is now confronted with the reality of the market today. This is relevant to whether Mr Teoh will change his mind and restart a mobile roll-out, where one of his major missions to be first mover in 5G simply will not and cannot occur. Whatever Mr Teoh believed in 2017 as to being a first mover cannot be a rationally held belief now. The other matter to recall is that absent the merger, TPG has an asset (its spectrum) that is depreciating at around XXX XXXXX per month and generating no revenue. Any decision as to its future will have to be made very soon after the fate of the merger is known. This is an aspect which sways in the balance of the consideration Mr Teoh needs to consider, in light of his current views as expressed in this Court. 377 I return to the issue of TPG entering the market again with a disruptive offer. Mr Teoh gave evidence that although he previously thought that TPG could make a disruptive offer, namely the $9.99 unlimited data plan announced in May 2018, this is no longer the case. Data demand is growing, and TPG's competitors now offer far more data at lower price points. 378 As I have mentioned, Mr Levy agreed that in May 2018, he had thought the $9.99 unlimited offer would attract significant consumer interest. Towards the end of 2018, Mr Levy had started to observe community concerns being raised about TPG's small cell sites, and felt these concerns could adversely affect the attractiveness of TPG's offer. Mr Levy also considered that these concerns were going to expand, not contract, particularly as he was approached by the Federal Treasurer and Communications Minister in relation to them. He said that TPG did not have a solution for these concerns. Although he thought the $9.99 offer still would be competitive as at December 2018, he also thought there was a group of affected people that would make the product less successful. 379 Since December 2018, Mr Levy formed the view that TPG's offer would no longer be disruptive, because the market has changed. He said he was 'surprised by how fast the market was moving', and that TPG now would need to offer data inclusions of 60 GB per month to create a stir. When asked what had caused him to form this view, he said the nature of the marketplace had changed since 2018, and it had become more aggressive. 380 Mr Levy observed that whereas Telstra and Optus previously only offered SIMO plans on a contract, as of June 2019, Telstra had now moved to 'no lock-in' contracts. This was one of the reasons why Mr Levy considered that TPG would now need to offer 60 GB of data per month. Mr Levy also said that gaps in TPG's coverage, along with delay in rolling out the network and no roaming agreement, meant that more data needed to be offered to counter these limitations. 381 Mr Levy also said that Telstra and Optus were now offering 5G products when they were not doing so in May 2018. When it was suggested to him that Optus' 5G fixed wireless product was not relevant, Mr Levy disagreed because both products are 'internet, and you can use internet … how you like'. This view was supported by Exetel's Mr Ward, who said he viewed TPG's unlimited offer as more of a mobile broadband product than a mobile product. 382 Clearly, the market dynamics are evolving. In TPG's internal retail market competitor analysis, comparing the December 2018 report with the July 2019 report, the following market changes become apparent: (1) The data inclusion on Telstra's $30 pre-paid plan increased from 8 GB to 20 GB/10 GB. (2) The data inclusion on Exetel's $14.99 plan increased from 1.5 GB to 4 GB. (3) The data inclusion on Exetel's $19.99 plan is now 6 GB, whereas it did not previously have a plan at this price point in 2018. (4) The data inclusion on Exetel's $24.99 plan is now 10 GB, whereas previously this amount of data was provided at $34.99. (5) The data inclusion on amaysim's $20 plan is 5 GB, whereas previously it was 2.5 GB. (6) The data inclusion on amaysim's $40 plan is 45 GB, whereas previously it was 20 GB. (7) The data inclusion on Belong's $40 plan increased from 15 GB to 30 GB. (8) The data inclusion on Exetel's $44.99 plan increased from 15 GB to 30 GB. (9) The data inclusion on Telstra's $60 plan increased from 38 GB to 60 GB. 383 As to whether the $9.99 unlimited data offer would currently be attractive to consumers, the ACCC called evidence from three MVNO representatives: Exetel's Mr Ward, Macquarie Telecom's Mr Davies and MyRepublic's Mr Baker. 384 Mr Ward expressed the view in his affidavit that TPG's $9.99 unlimited offer announced in May 2018 would still represent 'an extremely compelling offer to customers', and drive down wholesale prices offered to Exetel by Optus or another MNO. Mr Ward's view that TPG's unlimited offer was 'extremely compelling', was qualified in oral evidence where he agreed TPG's coverage would seriously diminish the attractiveness of the offer. 385 Mr Davies expressed the view in his affidavit that TPG's May 2018 unlimited offer, if offered today, would still be attractive even if TPG's coverage was more limited than that of other MNOs. However, Mr Davies was not aware of the information that he would need, such as the extent of the coverage and quality of TPG's proposed service, in order to evaluate whether TPG's offer was attractive. 386 Mr Baker expressed the view in his affidavit that if TPG's $9.99 unlimited offer in May 2018 were offered now, other MNOs would respond by launching budget 'fighting' brands or offering lower prices. I do not accept this view as necessarily being accurate. 387 Mr Baker has not operated in the retail mobile market in Australia, and his evidence was somewhat inconsistent, based upon historical information which he seemed unfamiliar with by personal experience or knowledge. 388 I accept the evidence of Mr Teoh and Mr Levy that TPG could not make a disruptive offer today, and its inability to do so has been caused by recent market changes. Without the ability to make a disruptive offer, this is yet another aspect for concluding that TPG lacks a business plan for how it could win customers in the retail mobile market as an MNO. 389 As I have stressed, significant time has elapsed since the previous roll-out. In the time that has elapsed since TPG ceased its roll-out, the market has changed and 5G has arrived. 390 Whilst detailing significant aspects of Mr Teoh's evidence, I mention that there were certain topics Mr Teoh was not cross-examined upon. I will briefly address those issues later. Mr Teoh was not asked about network sharing, the roll-out strategy proposed by Mr Wright, or the possibility of a 'thick MVNO' mentioned in the joint venture agreement between TPG and Vodafone. 391 As to the future market conditions, Mr Levy also gave evidence (which I accept) that the market has moved on and become increasingly aggressive since TPG conceived of its initial offering. As I have mentioned, Mr Levy's view is that TPG would now have to offer at least 60 GB of data to be competitive. Mr Levy considered this increase to be necessary for the following reasons: (1) the shift from contract to no lock-in plans by Telstra and Optus; (2) the gaps in coverage that TPG would have; (3) competitors beginning to offer 5G services; and (4) no roaming agreement. Mr Levy stated that he could envisage a customer using TPG's mobile offering as an alternative to fixed line broadband. 392 Mr Levy gave evidence about the market moving on and TPG's window for effectively rolling out the product shrinking. Mr Levy described the advantage that TPG had prior to the Security Guidance as: The advantage was that if we had brought a product to market in that timeframe as outlined in the press release and it was a decent user experience and people started speaking about it like we envisaged they would, then I believe from a timing perspective it would have been available, timing wise, before things like 5G started to … take off. 393 I now turn to the evidence of Mr Wright and the future possibilities for TPG. As I have indicated I also rely heavily on the evidence of Mr Wright. Whether all his conclusions are accepted or not, his evidence indicates the difficulties with a roll-out now which would impact on the future decision of TPG. In my view, Mr Wright's analysis would indicate that there are technical difficulties that stand in the way of Mr Teoh changing his mind to roll-out a retail mobile network. 394 In his report, Mr Wright examined substantially three alternative TPG networks: (1) the original TPG network design of April 2017 (the 'TPG Original Network'); (2) the predominantly small cell network that was being rolled out prior to being abandoned in January 2019 (the 'TPG Small Cell Network'); and (3) an alternative design of Mr Wright's conception that utilises additional 5G small cells on poles at midpoints between the 4G poles (the '5G Midpoint Network'). This alternative design that Mr Wright undertook was to model a hypothetical of what would happen if you added 5G small cells to the same poles as TPG already had its 4G cells based on the idea that Mr Hanly and Mr Teoh had in 2018 and early 2019, and included another model of a different hypothetical of what would happen if TPG continued with the type of 4G rollout that it had been undertaking with Huawei, but replaced it with a different vendor's 4G equipment. 395 Mr Wright's conclusion about the TPG Original Network is that it would have been unlikely to have supported TPG's announced objectives, including as to cost and the number of customers that TPG assumed it would have (being 300,000 customers at launch and then 60,000 customers added per month). This was because this network would have had insufficient capacity to cope with the number of customers assumed to use it. 396 On Mr Wright's calculations, the capacity of the TPG Original Network would have been exhausted before the end of the 2019 financial year, and the capacity deficiency increased at an alarming rate thereafter. Even as TPG added more base stations, capacity would have continued to have been exceeded. Adding 5G to this network design would not have made any significant or material improvement to this outcome. Network capacity was exceeded by the time that TPG acquired 2.24% of the market. The practical consequence of the capacity shortfall projected by Mr Wright was that sites within the network would be extremely congested, particularly during busy hours, and customers would see the quality of their service slowing down and some applications, such as streaming video and music, would not work. 397 Mr Wright agreed that the customer experience on the TPG Original Network would have been so poor that it would start to lose customers, and it would have been difficult for it to grow customer numbers. It would have had to take demand management steps, such as ceasing offering 'endless' data plans, throttling speed, capping data and raising prices. 398 Mr Wright also assessed the TPG Small Cell Network, which comprised 630 macro sites and 4,865 planned small cells. Mr Wright noted that around 60 of the macro sites were in Darwin and Tasmania, and said he was not sure of the purpose of those sites 'other than, perhaps, to allow people to get some service if they went to those locations'. 399 Mr Wright's conclusion was that the TPG Small Cell Network was better than the TPG Original Network in terms of capacity, but that it had some problems in terms of design, including shortcomings in coverage around the sides of the antennas and the very small footprint that TPG was planning to build the network within. TPG's cell design of placing two antennas back-to-back would have created areas of low coverage to the sides of the antennas: there would be gaps in coverage in each 'circle' around TPG's small cell sites. 400 Mr Wright projected that the TPG Small Cell Network would have exhausted its capacity by June 2023 by a significant amount and that the capacity shortfall on the network would have grown at a 'fairly striking' rate over the next four years. 401 Mr Wright's conclusion was that the same capacity problems that would have existed in the TPG Original Network would also have arisen with the TPG Small Cell Network, but at a later date. In Mr Wright's view, the TPG Small Cell Network would have been unable to meet TPG's objective of being able to add 60,000 customers per month. 402 Mr Wright also assessed the coverage of the TPG Small Cell Network. In CBD areas, Mr Wright considered that this network would have satisfactory coverage and reasonable data rates at street level, but indoor coverage would be poorer or absent. Coverage would drop as customers moved further into the building. Mr Wright explained that the small cells would be fixed between three and ten metres from the ground, projecting a radio signal down to the street and because small cells are so low the amount of signal going upwards is reduced. The impact of this is that indoor coverage between the third and fifth floors of a CBD building would be variable, and any coverage above that would be highly variable. Mr Wright explained that this variability in coverage was an outcome of the network being predominantly comprised of small cells. Mr Wright considered that, when 5G was deployed on the TPG Small Cell Network, the coverage would be good outdoors at street level but weak indoors. 403 Outside of CBD areas, Mr Wright considered that indoor and outdoor coverage would be patchy and that there would be holes in coverage until the roll-out is complete, which would be exacerbated by areas where community or regulatory reaction impacted the roll-out. Mr Wright said that the patchiness or 'incomplete coverage continuity' would affect the customer experience. This gave rise to a risk that calls would drop out and data rates would slow down indoors or above the third floors of buildings in CBD areas and in other areas where the network was patchy. 404 Mr Wright said that he did not think that TPG's product would appeal to commercial or enterprise customers because it would not deliver the quality provided by a 'tier 1 network' such as the networks of Telstra, Optus and Vodafone. Mr Wright expected the service that would be provided by TPG's Small Cell Network would be 'far inferior' to the service provided by the three existing MNOs. He said that customers 'who wanted continuity of service … would probably pay more and go to a different service provider'. 405 Mr Wright also developed his own design, the 5G Midpoint Network. Mr Wright agreed that this design would largely have the same coverage and quality limitations as the TPG Small Cell Network. Mr Wright agreed that the coverage issues in CBD areas were 'much the same' between the 5G Midpoint Network and the TPG Small Cell Network. He also agreed that the coverage issues in the areas outside of CBD areas and in outer metropolitan areas were 'largely' the same between the 5G Midpoint Network and the TPG Small Cell Network. Mr Wright anticipated that both networks would have poor levels of cover in the outer metropolitan areas compared to the existing MNOs, because the 566 outer metropolitan towers that TPG was planning to build and which are included in both models would provide only 'a thin network'. 406 There were other matters Mr Wright raised, and there were matters of cost, but in the end the evidence of Mr Wright was informative as to the technical difficulties TPG would face now. It is just another factor to take into account in determining the likelihood of a changed position being taken by Mr Teoh.

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Whether TPG could fund a second attempt at network roll-out 407 The ACCC contended that neither Vodafone nor TPG demonstrated that TPG would not have the financial capacity to roll-out a 5G upgradeable mobile network. I conclude that it would be difficult for TPG to be able to fund the substantial capex necessary for such an endeavour on terms that would be acceptable to the existing shareholders of TPG, including Mr Teoh and WHSP. 408 There are three interrelated factors: (1) the effects of the failure of TPG's first mobile roll-out on its credibility with debt and equity investors, particularly in the light of the evidence of Mr Wright and explanations of TPG's senior managers of the problems that TPG was facing with its first roll-out; (2) any business plan prepared by TPG, even if acceptable to the TPG Board, will be heavily scrutinised and likely considered to be unacceptable by debt and equity investors; and (3) TPG's financial position has deteriorated since April 2017, when it last raised capital, due to its increased debt and reduced cash flow. 409 The first observation to make is that TPG's first mobile roll-out was high risk and faced a probability of not being profitable. This risk was recognised by Mr Teoh, and was reflected in the substantial discount at which Macquarie Capital required the April 2017 capital raising to be priced XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX. This discount was driven by Macquarie Capital's expectation of the adverse reaction of investors to the price that TPG had paid for 700 MHz and the XXXX XXXX XXXX XXXX XXXX XXXXX. This scepticism was reflected in equity analyst reports at the time of the April 2017 capital raising. 410 This scepticism was shared by other market participants. Mr Sixt, a finance director with experience in rolling out mobile networks, including in Australia, gave the following evidence: [F]rom the initial announcement … I simply didn't understand how a company of TPG's scale … could finance investment in a competitive fourth network, and I guess that all comes from … my bias as to where sources of financing come from, and how finite they are at any point in time. So I first of all did not personally believe that anything like a competitive network could be [rolled] out ... for $600 million, something very wrong with that picture given that nobody else has done it for less than several billion dollars. I hope we're not that stupid. So … I didn't believe … that it would get done for $600 million. And I also didn't believe that TPG would have the capacity ultimately to fund a fully competitive … mobile network. 411 The ACCC submitted that if the cost of TPG rolling out a 4G mobile network with an alternative vendor is not materially higher than the cost of rolling out its 4G network with Huawei, then it may be possible for TPG to recommence a roll-out without a further capital raising. In that regard, the ACCC contended that it should not be assumed that the cost to TPG of rolling out a network with an alternative vendor would be higher in circumstances where TPG has not yet created a financial model for the roll-out of a mobile network with an alternative vendor, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX. 412 Mr Wright gave evidence estimating the costs that TPG would face in rolling out a mobile network. He considered first whether a 'traditional' macro cell network that would provide consistent coverage and service quality was a viable option. Mr Wright dismissed this as a realistic possibility, on the basis of his rough calculations that the costs of building such a network would exceed $3 billion. 413 He then considered the TPG Small Cell Network and a variation of Mr Wright's design, the 5G Midpoint Network. Mr Wright emphasised that both networks would be inferior to what he called the 'Tier 1' networks of Telstra, Optus and Vodafone, given it would have a more limited geographic coverage and variability of coverage in the area it covers (including limited or no coverage indoors, which is where 80% of mobile services are consumed). 414 Mr Wright calculated the costs of building the 5G Midpoint Network would be approximately $1.08 billion over an eight year period. That calculation excludes opex and the costs of acquiring any further spectrum. Of that amount, Mr Wright calculated the cost of the 4G network as being $439,347,035 with the balance relating to the deployment of 5G capacity to ease capacity constraints. However, these calculations are highly dependent on their assumptions, and Mr Wright accepted that varying just one of his assumptions (the cost of deploying fibre to the midpoint cells) would increase the cost by up to $133,982,100. 415 Mr Wright emphasised that he expresses no view on the business or investment implications of the costs he calculates, nor on whether it would constitute a commercially feasible option for TPG. Mr Wright's model did not include any estimate of the revenue the networks would generate and did not include any allowance for opex. The 5G Midpoint Network that Mr Wright has designed has two and half times more sites (and poles), and has two and a half times for opex and power demands. The costs of building that network far exceeded TPG's original budget for capex. Mr Wright agreed that the commercial reasonability of the model would be a question for Mr Teoh and the TPG Board. 416 But even taking Mr Wright's costs, and considering that the spectrum assets that TPG would be using in such a business are presently valued by TPG at $1.335 billion, any viable business model would require a return to be available on an investment of something in the order of $2.5 billion. This is in circumstances where Mr Wright acknowledged that the coverage and capacity of that network would be substantially inferior to the 'Tier 1' networks of the existing MNOs.

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Funding through free cash flow 417 The ACCC suggested that it may be possible for TPG to begin to roll-out a network without raising further debt or equity. That was put on the basis that TPG could use its existing cash flow to meet the costs. In the light of TPG's recent financial performance, there is no real likelihood that the TPG Board would commit TPG to the capex requirements to build a mobile network from available cash flows. 418 Since April 2017, TPG's balance sheet has deteriorated. Earnings have decreased, principally due to the migration of TPG's customer base from DSL to NBN products, which reduces the average margin per customer. TPG's debt has increased. As at 31 July 2017, TPG had drawdown bank debt of $900 million. By 31 July 2019, TPG's drawdown bank debt had risen to $1.425 billion. 419 TPG reported its cash flow position for its 2019 financial year in its full year results presentation issued on 5 September 2019. The results show that its operating cash flow of $836.3 million was entirely consumed by tax of $128.6 million and capex for its core business (the 'business as usual' ('BAU') capex) of $198.7 million, mobile spectrum costs of $352.4 million, mobile roll-out costs of $86.1 million and capex for the Singapore mobile network roll-out of $80.1 million. This has led to a decrease in TPG's cash balance over the year, which stood at only $51.4 million as at 31 July 2019. 420 On 5 September 2019, TPG stated to the market that it expected EBITDA for its 2020 financial year to drop to between $735 and $750 million. This was driven largely by a reduction of around $75 million as customers moved from DSL connections to the NBN, and $25 million as a result of the declining profitability of NBN customers. Mr Banfield projected that margin reduction, as customers transfer to the NBN (as he called them, 'the NBN headwinds'), will reduce TPG's profit by around $150 million over the next five years. Mr Banfield was not anticipating any positive cash flow from the Singapore business in the immediate term. 421 As at 31 July 2019, TPG had debt facilities of $2.391 billion, of which (as I have already indicated) $1.425 billion was drawn down. The maturity profile of these facilities as at 31 July 2019 was between 1.2 and 5.2 years, with a weighted average of 2.6 years. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX. 422 TPG reported to the market on 31 July 2019 that, once its spectrum liabilities are taken into account, its net debt as at 31 July 2019 was XXXXX XXXXXX, which gave it a leverage ratio of 2.4x. Its spectrum liabilities are the final instalment of XXXXX XXXXXXX for the 700 MHz spectrum and XXXXX XXXXXXX for its share of the 3.6GHz spectrum purchased by the joint venture company, Mobile JV Pty Limited ('Mobile JV'). If TPG did not apply any future cash flow to pay down debt, the spectrum payments would leave approximately XXX XXXXXXX of headroom under TPG's facilities. 423 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXX XXXX XXXX. This will be a matter for the directors and shareholders of TPG to consider in the coming months. 424 The following table sets out the EBITDA projections that Mr Banfield provided to TPG's auditors, KPMG, in connection with the impairment review conducted of TPG's assets for the audit work for the year ended 31 July 2019 and the consensus of the forecasts of equity research analysts as at 27 August 2019: 425 On Mr Banfield's projections, TPG will XXXX XXXX EBITDA over the period 1 August 2019 to 31 July 2022, and then XXXX XXX XXXXX XX XXXXXX XXX XXXXXXX in each of the 2023 and 2024 financial years. The consensus of the analysts is that TPG's EBTIDA will decline in the 2021 financial year and be flat in the 2022 financial year. 426 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX. 427 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 428 TPG will also have to fund the capex of its existing businesses. In the impairment review provided to KPMG, Mr Banfield forecast that its consumer business will require around XXXXX XXXX XXXXXX and its corporate business will require around XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX each year for the next five years. In addition, its Singapore mobile business will also have capex requirements. 429 Finally, TPG will need to have available funds for other corporate needs, including payment of dividends to its shareholders XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XX would not be desirable in commercial terms. In September 2017, TPG reduced its half yearly dividend from 7.5 cents per share to 2 cents per share, and has maintained that level since. Given the emphasis WHSP places on cash flow and paying dividends to its own shareholders, this has been an ongoing concern to WHSP. Exhausting free cash flow to commit to a new project would diminish TPG's ability to pay dividends. 430 All the above information comes from the reports and statements made by TPG to the market and the evidence of Mr Banfield which I have accepted as giving an accurate account and reasonable predictions. In my view, it is not likely that TPG would or could fund a mobile network roll-out from free cash flow. It will require another source of finance.

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Funding a roll-out with debt 431 The ACCC also submitted that TPG would be able to obtain additional debt finance to fund a mobile network roll-out. I do not consider it is likely but in any event it would be difficult. This is because TPG's existing businesses do not have the capacity to support a greater level of debt. Debt financiers are likely to perceive the risks associated with TPG attempting to build a mobile network as too great, particularly as the network would likely have the poor coverage and user experience that Mr Wright described. 432 It is instructive to look at the recent debt refinancing carried out by TPG. On 30 September 2016, the TPG Board approved Mr Banfield taking steps to refinance TPG's debt facilities, which were then $1.635 billion. From September to December 2016, Mr Banfield negotiated with TPG's lead lenders (ANZ, NAB and Westpac). On 9 December 2016, TPG entered into a revised facility agreement. 433 During the negotiations of that facility, Mr Banfield was seeking to secure as much financing flexibility as possible, for reasons including that TPG may seek to acquire the 700 MHz spectrum. In late 2016, Mr Banfield had discussions with ANZ about the capacity for TPG to increase its debt facilities further if required. ANZ indicated that it would be comfortable with TPG increasing its facilities to a maximum leverage ratio of 3x TPG's forecast annual EBITDA. While TPG's debt covenant ratio was 3.25x, ANZ made clear that it expected some headroom between the leverage ratio and the debt covenant, to allow for the possibility of adverse movements in EBITDA. Based on these discussions, and the fact that TPG's EBITDA was around $800 million at the time, Mr Banfield thought that TPG would be able to increase its debt facilities by a maximum of $750 million to a total facility limit of approximately $2.4 billion. An 'accordion facility' was included in the refinancing at this time that allowed TPG to borrow an additional $750 million without the lenders varying the facility agreement. This was not a commitment by the lenders to lend that amount. 434 Following the April 2017 capital raising, Mr Banfield contacted TPG's syndicate of lenders to discuss activating the 'accordion facility' and increasing TPG's debt facilities by $750 million. The TPG Board agreed that, although the peak funding requirement would not arise for over two years, it would be prudent to secure the $750 million increase now so that TPG had 'funding certainty'. 435 Negotiations took place between TPG and the lenders from late April to September 2017. On 18 September 2017, TPG increased its debt facilities from $1.63 billion to $2.385 billion with 22 lenders, and increased its debt covenant ratio from 3.25x to 3.5x. 436 Mr Banfield said it was much more difficult to secure this finance than had previously been the case. Westpac, which had a long relationship with TPG, expressed reservations about continuing their participation, and required a meeting with Mr Teoh. Mr Banfield had to meet with many potential lenders, including overseas lenders. The perception that he formed through his interactions with them was they considered the mobile network roll-out project to have greater risk than TPG's existing business. The lead banks (ANZ, NAB and Westpac) scrutinised the business case and prepared forecasts of TPG's likely future performance. TPG was required to present on its strategy to existing and potential lenders on numerous occasions in July and August 2017. 437 During the negotiations in 2017, Mr Banfield was looking for ways in which to increase TPG's debt covenant limit. In June 2017, ANZ stated that it would approve a temporary covenant increase to 3.75x, but this increase was not agreed to by the other lenders. Ultimately, the position reached was that TPG's debt covenant was increased to 3.5x to accommodate the inclusion of unpaid spectrum payments into its financial indebtedness. 438 It will be recalled that Mr Banfield expects that TPG's debt in January 2020 will be around $1.8 billion, having regard to the spectrum payment which is due, and TPG plans to pay down debt from cash flow, which will give it headroom of around $600 million. XXXX XXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. If TPG wished to roll-out a new network it would be impossible to do so under its existing debt facility. It would be essential to extend Facility A1. 439 XXXX XXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXXXX X. 440 TPG's debt will have fallen to be around $1.8 billion in early 2020 only because TPG is no longer building a mobile network, and does not intend to build a new one. Hence, TPG can use spare operating cash to pay down debt. However, if the cash would instead be used to fund a new mobile network it would not be available to pay down TPG's debt. Of course, if TPG could pay down its debt, then there would be no cash left in the 2020 financial year to fund a new network. 441 It seems to me, accepting this evidence, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 442 Then, I see no reason to assume that there will be any refinancing or extension of Facility A1. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. The future will be a matter for the TPG Board, but an emphasis on deleveraging would be rational. 443 I accept Mr Banfield's statement that 'if TPG's earnings were to trend towards $700 million, it would be risky for TPG to draw down on the full amount of its debt facility'. Rather, consolidated BAU EBITDA for the 2021 financial year is forecast to be XX XXXXXX. The forecast XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. The ACCC submitted that the projections that TPG provided to KPMG make clear that, even accepting the difficulties of forecasting as a result of NBN-related earnings volatility, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 444 As I have said already, in looking at statements from a company, context is important. Caution should be exercised in respect of reliance upon the forecasts TPG provided to KPMG. It is better in considering TPG's financial position, and how that position has changed, to look at TPG's official, public results and forecasts. In September 2018, its result for the 2018 financial year was $841 million, and its guidance for the 2019 financial year was $800 to $820 million. A year later, in September 2019, its result for the 2019 financial year was $823 million and its guidance for the 2020 financial year is $735 to $750 million. 445 The ACCC's submissions draw a contrast between figures that Mr Banfield inserted into the financial model in June 2018 and the more recent forecasts he provided to KPMG. These forecasts were prepared for quite different purposes, namely, internal long-range forecasts prepared for the purposes of an impairment review. But in any event, in June 2018, TPG's roll-out was underway and its debt facility was already in place. To draw any comparison for the purposes of assessing the likelihood of TPG's entry, or its ability to negotiate a debt facility, one would need to go back to the figures in the model in April 2017. The 7 April model forecast $820 million BAU EBITDA for each year through to 2024, and the 10 April model forecast EBITDA, which included projected EBITDA for the Singapore business, starting at $813 million, dipping below $800 million in the 2019 financial year, and thereafter going to $1092 million by 2024. 446 TPG's capacity to borrow to provide the necessary capital to fund a second attempt at a mobile network roll-out, will be at the very least difficult, and will in my view be unlikely. At the very least TPG's difficulty in doing so would be one of the factors that would discourage the TPG Board to re-consider a future roll-out. It is also important to consider the interaction of cash and debt, and to keep in mind that TPG's desire was to not exceed a leverage ratio of 3.0.

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Whether a roll-out could be funded with equity 447 When TPG previously conducted a capital raising in 2017 to support its network roll-out, Macquarie Capital, which undertook the capital raising for TPG, required both major shareholders (Mr Teoh and WHSP) to pre-commit to taking up their full pro-rata allocation. Based on their combined 60% shareholding, this meant that they together purchased $240 million of the required amount. This capital raising also had to be conducted at a deep discount to the traded price (18.9% to theoretical ex-rights price and 20% to last traded price). 448 With the effluxion of time, the failure of TPG's original network roll-out, and the scrutiny that TPG's original plan has received in these proceedings, it is unlikely that Macquarie Capital or any other bank could be prepared to underwrite a further capital raising without 100% commitment by Mr Teoh and WHSP. 449 In particular, any future raising would depend critically on Mr Teoh's support. 450 On that issue, Mr Teoh gave evidence XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XX and that he does not believe that he could properly recommend a further capital raising to the TPG Board. That evidence was not challenged in cross-examination and I accept that evidence. 451 An important consideration in relation to a future capital raising is the attitude of WHSP. Mr Barlow's evidence is important in considering whether TPG would be able to pursue a roll-out, particularly through an equity capital raising. He confirmed that TPG represents a significant proportion of WHSP's asset portfolio. WHSP seeks to maintain a diverse investment portfolio, avoid high levels of debt and hold investments for the long term. Mr Barlow recommended to the Board of WHSP that it take up its full entitlement in the April 2017 capital raising. He did so because of Mr Teoh's belief in the mobile strategy, the potential of that strategy to provide an avenue for growth and to extract further value from TPG's fibre backhaul assets, and because, if WHSP did not participate, it would be diluted. Mr Barlow understood that one of the advantages of a 4G network roll-out was that it would give TPG an advantage in rolling out 5G, and allow TPG to be an early mover into 5G. 452 Mr Barlow was asked about WHSP's position if the merger does not proceed. He agreed that it would be preferable for TPG to find an avenue for growth. If Mr Teoh recommended a resumed mobile strategy, Mr Barlow said that WHSP would certainly take that recommendation into account, and his recommendation would be enhanced if Mr Teoh was participating in a potential capital raising himself. Mr Barlow considered that there would need to be a credible business case, which adequately addressed the significant challenges including technological challenges, the risks caused by any delays or cost increases, and how to address the incumbency advantages and offer a product that would obtain sufficient market share. Mr Barlow said that WHSP 'would want to … interrogate the plan a little bit more so than we did in 2017' and understand exactly what TPG's business plan was going to be. 453 Mr Barlow explained that WHSP analysed the April 2017 capital raising, knowing at the time that the raising had to take place because TPG had already committed to purchase the 700 MHz spectrum and the raising was going to occur at 'a very low price, a very high discount'. WHSP was conscious that, if it did not participate then the discount would be even greater and the share price would be even lower, and that would dilute the value of WHSP's residual holding. This made 'the importance of understanding the ins and outs of the business case … less important' because WHSP knew it would be in a worse position if it did not participate. Mr Barlow considered that had he had more information about the details of TPG's roll-out plans and its proposed coverage, he would have perceived a greater risk in it becoming profitable. WHSP paid for its commitment under the capital raising with bridging finance which was repaid in November 2017 through the sale of another WHSP investment. 454 Mr Barlow also explained that the circumstances of the 2017 raising provided little opportunity for WHSP to scrutinise or object to the capital raising, as TPG had already committed to purchase the spectrum, and so the capital raising was likely to go ahead with or without WHSP. As Mr Barlow put it, 'we felt we were a bit over a barrel [and] we had to participate'. Mr Barlow said he hoped that any future hypothetical capital raising would be conducted under different circumstances, with an opportunity to opt out and lobby the Board and Mr Teoh to change directions if WHSP 'didn't think [the proposal] stacked up, or … we didn't have the ability to follow or rights and we thought that it was going to be detrimental to our residual shareholding'. 455 He contrasted this to how he would approach a hypothetical future capital raising. Mr Barlow gave evidence about how he would approach any future capital raising, on which he was not challenged. Mr Barlow said that if TPG was proposing new capex which WHSP did not think stacked up and would be detrimental to its residual shareholding, WHSP 'would be in a position to lobby for it not to go ahead'. 456 It was put to Mr Barlow that, if Mr Teoh consulted with WHSP about a future business plan to become an MNO, and WHSP agreed with it, it would support the capital raising because it would not want to be diluted. Mr Barlow said it would not be as simple as agreeing to the proposed business plan. It would involve critically analysing and considering how WHSP is going to fund that and that would be a function of the size of the capital raising. WHSP may not have the capital to contribute. It does not have any significant cash. While it could bridge with debt, in the end it would have to sell one of its existing assets to fund the participation. Mr Barlow explained that WHSP would undertake an analysis of whether the upside from investing in the TPG hypothetical case exceeds the returns from existing investments, having regard to the tax consequences of selling existing assets which mostly have a very low costs base. WHSP would have to be satisfied that TPG's new business plan is not only robust but exceeds the return WHSP can obtain from its existing portfolio, considering the tax payable if assets are sold. Mr Barlow said that if the future capital raise was at a price that was so low that it was going to significantly dilute existing shareholders, then WHSP would actively lobby for the capital raising not to go ahead. 457 If Mr Teoh and WHSP refused to participate in a capital raising for a risky project in which Mr Teoh had no confidence, that is likely to be the end of the matter. The discount that would be required for a raising in which Mr Teoh and WHSP did not participate would be on such unfavourable terms that shareholders would be against it and the Board would be unwilling to approve it in those circumstances. Mr Barlow gave evidence that WHSP would actively lobby against a capital raising in such circumstances even if the raising was in support of a business plan that it considered sensible. 458 Further, even if WHSP did agree to participate, the likelihood is that any future capital raising would be likely to require a similar, if not greater, discount than the last capital raising. The discount on the last occasion reflected Macquarie's assessment of the discount required to persuade shareholders to participate in the raising. It was calculated by reference to the perceived risk involved in the transaction. Any future raising would be likely to be seen as more risky than the original transaction. 459 This means that any capital raising would be on terms damaging to TPG's shareholders because it would dilute the value of their shares. Mr Teoh would be 'very reluctant' to recommend such a capital raising to TPG's Board. 460 TPG's ability to access the equity capital markets was also the subject of both lay evidence from Mr Banfield and expert evidence from Professor Gray and Mr Neal. 461 Mr Banfield did not accept that the conditions for any future capital raising would be more favourable than the conditions at the time of the April 2017 capital raising. He said that the effect of the high price paid for 700 MHz spectrum on the April 2017 capital raising would apply equally to any future capital raising for a future mobile project, because if the raising was occurring then TPG would not be selling its very valuable assets, the spectrum, and so the same concerns would apply. 462 As to the evidence of Professor Gray, his expertise is in relation to how the debt and equity investors who would ultimately be asked to fund the project would assess risk and decide whether to invest. Professor Gray provided evidence about how debt and equity investors are likely to react to TPG's attempting to raise further debt and equity investment. As he explained in his report his teaching, research and consulting experience extends to issues relating to investment decision-making and the factors that investors consider when constructing investment portfolios. 463 Professor Gray assessed the factual substratum that would inform the decision by investors as to whether to support the capital raising. He concluded that it was highly unlikely that a capital raising could be executed, even with the participation of Mr Teoh and WHSP, because any future raising would likely have to be at a greater discount than the 20% discount required in April 2017 because of the effect on market perception of TPG created by the failure of its first roll-out and the deterioration in its financial performance since that time. I accept this assessment. Professor Gray was not challenged on his conclusions that debt financing would not be available, or that there would be no free cash flow to finance the project. The approach taken by Professor Gray in analysing Bloomberg data about the discounts on subsequent capital raisings (which approach was criticised by the ACCC) does not affect his analysis as to prospects of success of a future TPG capital raising. 464 Then, in my view, the prospect of an underwriter or investors being willing to invest their capital if Mr Teoh or WHSP did not is remote. 465 XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. The explanation provided by Professor Gray was a reflection of the impact that the decision of company 'insiders' not to participate in the capital raising would have on other investors. It is obvious that investors would be sceptical of any capital raising if Mr Teoh and WHSP, with their superior knowledge of TPG's business and prospects, were not willing to put their own money into any capital raising. 466 Mr Neal took a different view, which I do not accept. He expressed a view that a $400 million capital raising by TPG would be capable of being underwritten even without the financial participation of Mr Teoh or WHSP. 467 However, Mr Neal came to that view entirely as a consequence of a series of underlying material assumptions. Mr Neal did not offer any opinion on the reasonableness or achievability of this assumption: Mr Neal was not a telecommunications expert. The assumptions made by Mr Neal include, for example, that TPG is able to devise a model with a positive NPV that is strategically sound and soundly costed, addresses all material issues identified by Mr Teoh and Mr Banfield in their evidence in these proceedings, and Mr Teoh being able to at least explain why he would not be participating in the equity raising. 468 Mr Neal had not assessed what issues might be relevant to equity analysts, or which TPG might have to address before it could carry out a capital raising. He agreed that if TPG could not address those concerns then it would have an adverse impact on TPG's capacity to raise equity. The clear picture that has emerged from the evidence is of the manifold difficulties that would need to be disclosed to the market. 469 Mr Neal also expressed the opinion that the discount applicable to a 2020 capital raising would be lower than 2017. I find this not to be cogent. TPG would be raising more than three times as much as it did in 2017 from shareholders other than Mr Teoh and WHSP, there has been a downturn in TPG's financial position, and the project has failed once. 470 Finally, Mr Neal had not assessed the discount that an underwriter would apply to any hypothetical future capital raising by TPG using the methodology that an underwriter would in fact apply in the telecommunications environment. This may be understandable as Mr Neal was not a telecommunications expert.

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TPG will monetise its spectrum 471 The existing fact is that TPG has no business case for rolling out a mobile network, and has indicated it will not do so absent the merger. It is most likely that TPG will move on and monetise its spectrum assets, either by sale or sub-lease: it is costing TPG XXX XXXXXX in depreciation a month to hold its spectrum, XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 472 TPG will need to move relatively quickly as its spectrum is depreciating at such a cost, when TPG currently sees no prospect that a business case for a mobile network will emerge. Monetising the spectrum would not be irrational or unlikely compared with holding onto it for a mobile network. 473 TPG has already committed itself to the path of seeking to monetise its mobile spectrum and network assets in the event the merger does not proceed. I see no basis to conclude that it would alter that course if the merger could not proceed. While TPG has several assets that give it some advantages in rolling out a mobile network, such as a fibre network and a call centre, it does not follow that rolling out a mobile network is its best or only strategy. 474 Mr Teoh's view is that the best strategy for TPG to pursue if the merger cannot proceed would be to reduce debt, and to that end the TPG Board directed him in March 2019 to look at ways to monetise TPG spectrum assets. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXX XXX. 475 XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX, XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX. 476 Telstra would be another potential purchaser of TPG's spectrum. Telstra was not permitted to participate in the 2017 auction for the 700 MHz spectrum as a result of government allocation limits. However, there are no equivalent rules that would necessarily prevent Telstra from acquiring the 700 MHz spectrum from TPG as a commercial arrangement. If the merger does not proceed, there is a very real possibility that Telstra's dominance would be further entrenched through the acquisition of this spectrum. 477 Whilst on the subject of the sale of TPG's spectrum, I make these observations. 478 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 479 Just moving ahead to a scenario where TPG did enter the retail mobile market, TPG would likely sell (or sublicense) its spectrum. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. Any counterfactual in which Vodafone slips further behind Telstra and Optus is likely to result in a decline in competition in the retail mobile market. 480 I accept that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. I will address this issue later. 481 Then if TPG does not become an MNO, and XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 482 The extent of competition in a counterfactual world in which TPG does enter, and its relative competitiveness to the factual in which the merger occurs, was properly described by Mr Foster: XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 483 If the merger does not proceed and TPG does not enter, there is a real prospect that the market for retail mobile services will be reduced to '2.5 operators' as Mr Foster suggests. 484 I also mention that Mr Foster in his report showed that there was an economic rationale to sell or lease TPG's existing spectrum holdings and network assets. Whatever criticisms were or could be made of Mr Foster (for example on his customer 'churn numbers'), I do not consider this alters the position that the decision of TPG to monetise its spectrum in March 2019 was economically rational. 485 As to the debate about Mr Foster's analysis on 'churn', I do not consider it is of any importance to the ultimate analyses to be made. It was not suggested to Mr Foster, that his churn rate assumption was too high, not conservative or not supported by the evidence. As Mr Foster explained, he adopted the most conservative assumption based on historical average churns rates: 'choose the lowest [churn rate] that one observes today in Australia and use that number'. His model adopted a churn figure of 1.5%, which is lower than Vodafone's churn rate (3.4%) and TPG's MVNO churn rate (2.4%). Further, it should be recalled that churn numbers are an empirical assumption that a board member, major shareholder, debt financier or capital raising underwriter will need to evaluate based on their own knowledge and experience. 486 Mr Foster clearly explained that the import of modelling is to provide a framework or set of parameters to inform commercial decision making, not to supplant it: [O]ne really should avoid fixating on a single spreadsheet and a single model as though it were sort of a transcendental representation of the truth. I think modelling is an exercise and one needs to take the results of all these models in the round and what they all say. And, of course, the results will change when very important parameters change … [I]t's right that the model produced very different answers in response to those very important assumptions. But what I did want to say and add is one thing, which goes to this question of … was there a sort of revelation that took place in the mind of TPG between 6 April and 10 April simply because the NPV of the model goes from minus 300 to plus 700? And this, I think, comes back to the distinction between a business case and a financial model and a spreadsheet. … It's perfectly possible for me as a businessman hypothetically to look at that spreadsheet and say that loss of minus 30 million gives me huge amounts of confidence in the profitability of my business case, because I might look at that financial model and say, "I know that that model has been parameterised with assumptions that are very conservative" …

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The ability of TPG to obtain a roaming agreement on commercial terms 487 I do not regard a roaming agreement as being critical to allow TPG to offer a mobile service with good user experience that fills in coverage of the network beyond TPG's own footprint. The evidence led by Vodafone and TPG strongly suggests that a roaming agreement has not been critical to TPG's entry as an MNO to date. 488 However, Mr Teoh said that '[a] roaming agreement on commercial terms would assist TPG to enter as an MNO', and Mr Levy said that a roaming agreement 'would be an important part of making TPG's ultimate mobile offering attractive to customers'. (emphasis added) 489 The problem in this regard for any business case is that the prospect of TPG procuring a roaming agreement on commercial terms is very unlikely, as attested to by Mr Teoh. As to Optus, he said XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. As to Vodafone, Mr Teoh refused the suggestion that they were XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX. XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX. 490 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 491 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 492 The unlikely prospect of TPG obtaining a roaming agreement is also confirmed by the affidavit evidence of Mr Pachos, XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX in 2017 and 2018. He was not cross-examined. The thrust of Mr Pachos' evidence was as follows: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. (2) XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXX XXXXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXXXX, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 493 The fact that the prospect of obtaining a roaming agreement on commercial terms is unlikely further tells against the commercial reality of any new network roll-out. 494 If no roaming agreement on viable commercial terms would likely be provided to TPG this would mean that the TPG Board, in considering whether to recommence a roll-out, could not assume that the technical and quality issues that confronted the first roll-out would be addressed through such an agreement. 495 There is a body of evidence that establishes that if TPG were to roll-out a network it would need a roaming agreement and there may be difficulties in obtaining one: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (2) Mr Teoh gave evidence that if TPG were to roll-out a network, it is likely that initially, 'there would be blackspots (ie areas without coverage) in that network, such as areas where TPG had not yet deployed RAN equipment and in tunnels'. While TPG's network coverage would improve over time, Mr Teoh gave evidence that it 'would take years to address blackspots' and that a 'roaming agreement would also expand coverage beyond TPG's planned roll-out area'. In cross-examination, Mr Teoh explained the requirement for a roaming agreement in the following terms: You were after a roaming agreement with infill coverage?---Of course. Otherwise we would have a very bad service. The infill, like when you go to the car park or you go to inside the lift where TPG do not have coverage, and we need this type of roaming is very important. 496 That same analysis applies to any network that might be rolled out in the counterfactual, as explained by Mr Wright. In his first report, Mr Wright identifies that because the network he models only provides population coverage up to 60%, TPG may seek to negotiate a roaming agreement to get it to 80% 'if such a deal could be commercially negotiated'. 497 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX against the background of the ACCC declining to declare mobile roaming: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. As explained by Mr Pachos, XXXX XXXX XXXX XXXX XXXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. XX XXXX XXX XXX XXXXXX XX XXXXXX XXXX. Further, the Vodafone proposal was not one in which TPG would be an MNO. It contemplated that TPG would remain an MVNO. 498 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 499 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 500 Then it is to be recalled XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 501 Mr Berroeta gave evidence that: (1) the only mobile roaming agreement in Australia that is currently in effect is Vodafone's roaming agreement with Optus; (2) Vodafone's roaming agreement with Optus 'is aimed at giving Vodafone incremental coverage, rather than filling coverage holes'; and (3) there are no mobile roaming agreements in Australia that provide 'infill coverage'. 502 Mr Berroeta gave evidence in relation to the significant technical difficulties involved with an infill agreement, in particular in relation to providing 'seamless handover', as a customer moves from one network to another. If Vodafone was to provide seamless handover to TPG, their core networks would need to be fully integrated, a complex process requiring a major financial investment by the parties. Mr Berroeta's evidence was that he would be unwilling to direct Vodafone's capex budget towards offering infill coverage to another MNO. 503 Without seamless handover, customers encounter poor service as calls drop out when switching from one network to another. As Mr Berroeta explained, in the context of Vodafone's existing roaming agreement with Optus: [W]hen a customer of Vodafone enters an Optus roaming area, if that customer is covering a conversation on the phone, their conversation will drop because Vodafone is not capable of transferring that call like to Optus. That is a seamless handover. This is not a big issue when it is incremental coverage. It is a much bigger issue that it is an infill agreement that the customer is constantly going from one network to another. 504 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX, Mr Teoh explained that without infill coverage: [W]e would have a very bad service. The infill, like when you go to the car park or you go to inside the lift where TPG do not have coverage, and we need this type of roaming is very important. And what they propose is not that. They propose is outside 60 per cent. They … wanted us to cover 60 per cent before they give us the other area, and what they propose is take or pay, which is very expensive and risky. 505 Mr Wright's evidence was that an infill roaming agreement is unlikely to be achieved: TPG may attempt to acquire a roaming deal beyond this 60% population coverage area to satisfy customer expectations, potentially up to 80% of the population as TPG originally planned to service if a deal could be commercially negotiated. Such a deal would likely entail geographic roaming only outside of the TPG 60% population footprint and not within because in-coverage roaming agreements are not normally adopted due to the complexity of network signalling, high likelihood of call drops and overhead of ongoing network optimisation that might [be] required for all of the overlapping sites and cells in the network. 506 Therefore, I accept that if TPG was to roll-out a network it would be very important for it to enter a roaming agreement, and the form of roaming agreement TPG would need most would be an infill roaming agreement. Then TPG would have no real prospect of securing an infill roaming agreement, although TPG may be able to secure a donut style roaming agreement to extend its geographic reach (like the roaming agreement between Vodafone and Optus). However, this form of agreement would not resolve TPG's coverage problems, and XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 507 If TPG were to roll-out a network without an infill roaming agreement, TPG would go to market with a lower quality mobile service, relative to the network coverage provided by Telstra and Optus, because its network would not provide any coverage beyond TPG's planned network deployment. There would also be many more blackspots or gaps in TPG's network than it originally envisaged, due to areas where community or Council concerns would prevent the deployment of small cell sites.

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Thick MVNO versus network sharing 508 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 509 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. He explained that a thick MVNO was 'an MVNO that also has its own core network'. 510 Mr Teoh rejected the thick MVNO proposal when it was made in August 2017, but the possibility of a future thick MVNO arrangement was considered again a year later in August 2018 when Vodafone and TPG formed a joint venture for purposes of ensuring that they were entitled to bid in 3.6 GHz spectrum auction. The recitals to that joint venture agreement (the 'Mobile JVA') record that Vodafone had previously put to TPG a 'thick' MVNO proposal which TPG did not wish to progress at that time. One of the objectives of the joint venture is 'to discuss and pursue options for undertaking more efficient forms of spectrum and mobile/wireless infrastructure sharing'. 511 A distinction must be drawn, however, between the thick MVNO concept and the concept of 'network sharing' as between MNOs. The evidence of both Mr Berroeta and Mr Badrinath was that a 'thick' MVNO arrangement is simply a variation on the conventional type of wholesale agreement that would be reached between an MNO and an MVNO and is fundamentally different to a network sharing agreement, which is an arrangement between MNOs who agree to jointly share, dimension and manage particular parts of their radio networks. 512 The thick MVNO arrangement proposed to TPG in August 2017 is thus to be contrasted to where TPG rolls out its own mobile network, and has no advantage to offer TPG.

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There would be difficulties and delay involved in the network build 513 The difficulties of timing, namely that TPG now would not be one of first movers in 5G, and that the market has changed such that TPG's originally planned $9.99 unlimited offer would no longer be disruptive, are compounded by the fact that any network roll-out would be years from completion. 514 Mr Naik estimated how long it would take TPG to roll-out its network now using Huawei equipment. If the Security Guidance were reversed, and TPG resumed its network roll-out on 1 September 2019, Mr Naik estimated that even in a 'best case' scenario, it could not complete that roll-out before July 2022. 515 The Court has to take a realistic view of the position TPG now confronts. 516 Since ceasing its roll-out on 25 January 2019, TPG has not renewed any contracts for staff responsible for the mobile deployment. Accordingly, any decision to begin a new roll-out would require a lead time of some months. 517 Huawei's A + 2P product would be the equipment used for a 5G upgrade, and would take at least six months to be available for commercial sale. Then, if TPG used this solution, as opposed to keeping its passive antennas separate from its 5G AAUs on the pole, more time would be needed. 518 If TPG were to use an alternative vendor's equipment, the delay would be longer. This is because TPG would need to remove Huawei equipment, re-start its RAN equipment deployment process from scratch, and conduct lab tests and field tests on the vendor's equipment before it could be deployed, which would take approximately six months in total. If a radio frequency re-design were required, because the equipment had different coverage or capacity, or interference management capabilities, the roll-out would take substantially longer. 519 It is clear from the evidence that TPG encountered significant problems during its small cell roll-out arising from community opposition, which was supported by local councils and political representatives. Before considering whether to recommence any network roll-out the TPG Board would have to consider how it would manage these issues and how delays and difficulties arising from community opposition would impact the viability of the business case. 520 Mr Levy was of the view that community concerns around TPG's use of small cells was a problem and likely to become increasingly problematic as the network expanded. Mr Wright agreed that over the next 18 months, there will be heightened community opposition to small cells, and that this will slow down the rate of roll-out in the short to medium term. 521 With respect to consumer interest in TPG's mobile network offering, Mr Levy began to feel less positive about the product due to community concerns in relation to TPG's small cell network. Mr Levy gave an example of being contacted by the Commonwealth Treasurer, the Hon Josh Frydenberg, in relation to concerns being voiced by the Hon Josh Frydenberg's constituency (the electorate of Kooyong) about the small cell roll-out and in particular that TPG was putting up small cells near peoples' homes. 522 Then there are the EME regulations, which will impact the ability of TPG to use small cells, particularly in urban environments. If 5G small cells are used in urban environments, they will be closer to public areas, such as offices and residential buildings. TPG would need to give consideration to compliance with EME regulations, which are monitored and enforced by the ACMA, even though the regulations may not currently reflect proven health concerns. 523 Without the need for the Court to examine the EME regulations, issues are likely to arise for the compliance of 5G small cells with EME regulations. Earlier generations of small cells had very low power (approximately 2 watts). However, 5G RAN equipment is more powerful than earlier generations and may have beamforming capability, which potentially increases the hazard zone. This is particularly the case if the small cells are deployed in urban environments on structures such as lamp posts or electricity poles and if a large number of small cells are installed to try to achieve contiguous coverage. Industry practice is to ensure a three metre exclusion zone from where the hazard zone ends and the area accessible to the general public. If the high power and beamforming 5G small cells are installed on lamp posts or poles, which are typically at a height of only a few metres from the ground, the hazard zone will be much closer to the ground so it would be harder to achieve a three metre clearance from areas accessible by the general public. 524 Compliance with the EME regulations may require that the small cells be operated at a lower power to reduce the hazard zone, but doing this would consequently reduce the area over which the cell would provide coverage. That in turn impacts the number of small cells that would be required and the total cost and time required for a roll-out. 525 All I conclude is that these issues would have to be considered by TPG in considering the design for its network in the light of the 5G small cell solution that is identified. Relevantly, these are other factors which add to the challenges in costing and delivering any proposed mobile network, which would have to be considered by TPG's Board before deciding to roll-out. I put it no higher than that, but it adds to the number of potential obstacles that Mr Teoh and TPG would need to consider in any future decision to roll-out.

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TPG 527 The ACCC submitted that on the evidence TPG would be likely to be 'an important competitive force', operating as a direct competitive constraint on Vodafone and Optus, and less directly on Telstra. 528 I do not accept that the entry by TPG would have a substantial effect on competition in the retail mobile market. TPG's entry may have some benefit for price-sensitive customers in metropolitan areas but there is to be considered the anticipated lower quality of its network compared with that of Telstra, Optus and Vodafone. Vodafone may be the most affected of the three existing MNOs (as it targets price-sensitive metropolitan customers), but again this will not be in any way significant. 529 I accept that the evidence suggests that XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX. 530 I do not discount the possibility that in the future without the merger, both Vodafone and TPG could be competitors to a degree. As explained by Mr Smith, the customers that TPG would target as an MNO appear to significantly overlap with those customers that Vodafone would target in the future without the merger. Both Vodafone and TPG's networks would be focused on metropolitan areas with limited regional coverage, and both Vodafone and TPG would target more price-sensitive customers. 531 However, Dr Padilla expressed the view that what he terms the low end of the market is currently 'highly competitive' - '[a] large number of operators, including the MNOs' second brands and MVNOs, compete aggressively on price, offering increasing amounts of data and other service inclusions'. In my view this will mean that TPG's entry would not itself have a material impact for price-sensitive customers. I observe that, as at May 2018, Mr Teoh and Mr Levy were of the view that TPG's initial mobile offering would be 'disruptive'. However, that was in May 2018. The MVNO witnesses gave evidence that TPG's initial mobile plan was attractive and disruptive when it was released, but is not necessarily so now. 532 The ACCC also submitted that increased competition for more price-sensitive customers in metropolitan areas in the future without the merger is likely to have flow-on effects on other parts of the market. This is the 'transmission' between segments which was referred to by Mr Smith and Dr Padilla in oral evidence. 533 As Mr Smith explained, contrary to the view of Dr Padilla, the consumer demand for mobile services cannot be sensibly considered in two segments (high end and low end) - rather, competition will have effects across the market, because if prices are lowered in one segment, consumers in other segments will shift into that segment, and MNOs will make a competitive response. 534 Dr Padilla disagreed, but conceded that this was a matter of fact, rather than economic principle. 535 I am aware of various comments made by XXX XX Optus XXXX XXXX XXXX. They must be read in light of the time they were made, the level of generality in which they were expressed, the context in which they were made (by that I mean in the context of general consideration of the market at the time) and a lack of detailed knowledge of TPG on the part of the commentators. Nevertheless, as I have indicated, market participants provide a very useful indication of market conditions and dynamics. 536 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 537 Furthermore, in response to TPG's announced entry: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (4) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (5) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 538 Whilst these statements were made XXXX XXXX XX having some recognition that TPG's network would have limitations, the extent of this recognition was necessarily limited and far less than the knowledge of TPG itself and the Court after the hearing of these proceedings. The above statements were all made in different market conditions to those that pertain now or will pertain in the future. 539 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 540 The dual brand strategy allows Telstra and Optus to compete at the budget end (being the most price competitive place in the market), and retain margins and profitability at the higher end. Therefore, this mechanism results in an absence of transition at the low end of the market to the higher end. 541 Further, I stress it is important to look at the market now, and not by reference to an earlier period of time before Telstra introduced its dual brand strategy, and brand Belong. 542 I accept the approach of Dr Padilla as XXXX XXXX XX: he looked at the market place now, noticing that the major participants address the problem of cannibalisation, and intense competition at the low end by the dual brand strategy and their involvement with MVNOs. Thus the transmission effect has been interrupted. In any event, XXXX XXXX XXX is far less direct than the immediate competitive effect that MergeCo would impose upon Telstra and Optus. 543 When one takes into account the fact that whatever opportunity there once was for TPG to make a meaningful, disruptive entry as a fourth MNO has been lost, if TPG were to repeat its attempt to roll-out a mobile network in the future, such efforts could not have a meaningful impact on competition in the retail mobile market. 544 Then it is to be remembered that the necessary starting point for evaluating the state of competition in the counterfactual in which TPG rolls out a mobile network is to determine what that network might look like. I have already touched upon this in discussing Mr Wright's opinions. 545 Mr Wright was asked to identify any technically and commercially feasible options for TPG to roll-out and operate a mobile telecommunications network in Australia in the next five years. 546 Mr Wright accepted that his alternative model does not include any amount for opex. The effect of that omission is that the model does not account for the operating costs that TPG would need to cover to profitably supply retail mobile services using that network. I cannot assume that TPG could offer retail mobile services to customers on the same pricing terms as it announced in May 2018. 547 A similar point can be made in relation to roaming. Mr Wright's model did not include any allowance for roaming fees, notwithstanding that TPG would require a roaming agreement to satisfy TPG's originally-stated intention of reaching 80% of the population. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. This raises at least two possibilities: the first being that TPG would enter with a roaming agreement (although that would not provide infill coverage), but would have to charge customers significantly higher prices than it proposed in May 2018. The other is that TPG would forego its plans to secure a roaming agreement, with the effect that its retail mobile services offerings would be less attractive to consumers. One cannot conclude that TPG would be competitive in the relevant counterfactual without first forming some view of what TPG would do in these circumstances. 548 I turn now to Mr Wright's evidence that TPG would not be able to offer competitive retail mobile services using his alternative network design, aspects of which I have already addressed. 549 Mr Wright gave evidence regarding the type of service that could be expected from his alternative network design. In respect of the central business district, Mr Wright's evidence was as follows: the quality of indoor coverage would be poor. Mr Wright said the radio signals would, in some cases, fail to make it past the windows, 'depending on the window manufacturer'. Where the signal did penetrate the building, it was possible that there would not be a signal past the first internal wall. There would be a risk that customers might lose coverage and experience call dropouts just by walking indoors; while all indoor coverage was 'highly likely' to be 'variable', Mr Wright said it would be 'highly variable' between the third and fifth floor, and even more uncertain above the fifth floor of buildings. That is significant because it indicates that it is not just high rise office workers or apartment dwellers who would be affected; service would be doubtful in even relatively small multi-story buildings, and customers would risk losing calls simply by going above the third floor; 5G coverage would be particularly weak indoors; the problems of indoor coverage would affect data as well as voice calls in the form of slowing data speeds; outdoor coverage would also be somewhat variable. The exact coverage provided outdoors would depend on the spacing of the small cells and any clutter in the area, and there would likely be real coverage incapacity problems at the cell edge to the sides of the small cell antennas; and Coverage in tunnels, transit centres and shopping districts would be poor, unless there were in-building coverage systems installed. 550 Mr Baker of MyRepublic said that, for companies offering a retail mobile service, it is important to have good indoor coverage. Mr Davies similarly said that poor coverage resulting in calls dropping out is a matter that would be important to the consumer experience. 551 Mr Wright suggested that coverage would be worse still in the balance of the proposed small cell area - the outer ring around the CBD: indoor and outdoor coverage would be patchy with areas of holes until the roll-out was complete; and even once the roll-out was finished, the 'coverage consistency' would be 'variable' and there would be pockets of 'coverage shortfall, call drops and low data, particularly in directions away from the small cell antenna'. 552 In the outer metropolitan area, in the areas covered predominantly by macro cells, Mr Wright said that coverage would be 'thin' and poor compared with the incumbent MNOs. 553 Beyond the outer metropolitan area, there would be no coverage at all. Mr Wright's model mainly covered Melbourne, Sydney, Brisbane, Perth, Adelaide, the Gold Coast and Canberra. Outside of those cities, there would be no coverage at all absent a roaming arrangement. This means that there would be no coverage in places such as Newcastle, Wollongong, the Sunshine Coast, Hobart, Townsville, Cairns, Geelong, Toowoomba, Launceston or Darwin. 554 As with coverage, Mr Wright's evidence was that the speed of TPG's network would compare unfavourably with that of the incumbent MNOs. 555 Mr Wright accepted that the type of service that TPG could supply using his alternative network design would be inferior to the service provided by Telstra, Optus and Vodafone. TPG could not compete on quality with the incumbent MNOs in this counterfactual and could realistically only compete on price. In the absence of any evidence that TPG could effectively compete on price as a new MNO, and price alone, TPG would not be a meaningful competitor to the incumbent MNOs in that counterfactual. 556 Mr Wright made clear that the mobile service that TPG could deliver using his proposed network would require customers to endure substantial service limitations for even the most basic, everyday mobile functions. Customers could not depend on their phone service to receive calls or data indoors or upstairs, in train stations and shopping centres, or in the centre of the CBD if they found themselves off to the side of the relevant small cell antenna. Such poor quality service is different, for example, from budget MVNO services that provide reliable basic mobile functions, but might exclude inessential add-ons such as international roaming. On Mr Wright's account, TPG would not have been able to deliver a reliable baseline service. I cannot conclude that there would be any meaningful demand for such a product, much less that there would be sufficient demand for that product for it to have a meaningful competitive impact at some future point in time when TPG enters the retail mobile market. 557 Mr Wright accepted that his alternative TPG network would not deliver a service that would be attractive to commercial enterprise customers. He also said it would not appeal to any customer who wanted 'continuity of service' and that such users would likely use one of the incumbent MNOs. Again, it may be doubted that there is, or would be in the future, any significant customer group that does not desire 'continuity of service' from the mobile network. 558 As I have mentioned, I accept that TPG was rolling out a predominantly small cell network in 2018 and saw a commercial opportunity to sell a low price, poor quality mobile service. However, circumstances have changed. 559 Mr Wright's alternative network would deliver a substantially inferior service to that supplied by existing MNOs and MVNOs. It would be a product that relied on customers being satisfied with a service that was of some use outdoors in the middle of the CBD (albeit at slower peak speeds than those offered by competitors), but was of doubtful utility anywhere else. 560 The other variable to consider with regard to the counterfactual world in which TPG enters as a fourth MNO is time: the retail mobile market does not stand still, commercial offerings evolve and improve, and new technologies are introduced and adopted by consumers. 561 I have alluded to time issues previously. TPG's entry as a fourth MNO in the counterfactual cannot be imminent. Mr Teoh's evidence was that he would not change his mind about his decision not to roll-out a mobile network. If he was to reconsider, this would take time and careful consideration. Thus, even in the counterfactual where entry is assumed, TPG's roll-out will necessarily be at some point many months from now. 562 On Mr Wright's analysis, which assumed that TPG would resume its roll-out plans in September 2019, the roll-out would not be mobilised for three months (that is, until January 2020) and the first customers would not begin receiving the service until the 2021 financial year. Thus, assuming that there is some possibility that Mr Teoh and the TPG Board might change their mind next year, TPG would likely not enter the retail mobile market until sometime in 2021. On Mr Wright's model, such entry would be with a 4G offering at a time when Telstra and Optus had been offering 5G services for two years or more. XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 563 A longer period would probably be required. TPG would need to select a new vendor, agree commercial terms, arrange for delivery of equipment, complete necessary computer simulations, complete laboratory and field testing, and obtain deployment approvals (including, for example, structural drawings and pole licence agreements). 564 Moreover, the unlikelihood of TPG entering with a meaningfully competitive offering only increases as one assumes a more distant date of entry. 565 As I have said already, the ACCC's witnesses deposed to the fact that, if TPG made its May 2018 offer available to customers today, such an offer would still be attractive. The evidence of Mr Davies is an example: In my view, the offer TPG made in May 2018, if offered today, would still be an attractive one due to the price point and data consumption level, even if the TPG offer would have more limited coverage than other MNOs. That evidence was based on a misconception as to the service offered by TPG. Mr Davies did not appreciate it was a data only offer, with no voice or text service. Further, the question is not whether a TPG offering would be attractive today, it is whether it will be competitive in the relevant future. 566 I cannot conclude that there is any likelihood or any real chance that TPG could offer a competitive offering in the next five years. It must be recognised that prices in the retail mobile market have been falling and data inclusions have been increasing. This will impact heavily on TPG's past strategies. Further, as Mr Smith acknowledged, the MNOs' strategies for competing in the low end or price sensitive segment of the market XXXX XXXX XXXXX were influenced to some extent by TPG's announcement and these have already been implemented: As you go through the history of how mobile phone pricing in Australia and other countries has evolved, once you let the genie out of the bottle it is difficult to go backwards. Once Telstra accelerated the launch of Belong it would be difficult for it to un-accelerate that launch or take back that launch two years later. Once Telstra, Optus and VHA had moved to lower contractual commitments, it's difficult to go back on that. 567 Mr Smith also agreed that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 568 There are currently offerings that would closely compete on price and data inclusions with the kind of offer that TPG announced in May 2018, and which, when one has regard to the coverage and quality of the service, would prevail over the putative TPG offer. And there is little doubt that prices will continue to fall, and data inclusions will continue to rise in the future. 569 Mr Teoh explained the position in answer to a question from the Court as follows: I want your view as to what you would - I won't put it as high as recommend to the board, but what would your view be as to the way forward?---Okay. Let's say without any restriction we can use the current equipment and Huawei and the 5G. Yes?---I have to look at what we have, and … the business prospect. The market is moving on to 5G. So for us to be a viable business I have to be forward looking. I have to implement something, let's say … three years down the track. I need to be able to compete. And the product that I need to be able to compete is a mobile product, the mobile fixed wireless product, and I'm able to compete with Optus and Telstra to compete in the marketplace. And what do we have at the moment to compete? We … have limited spectrum, especially the 5G spectrum, because we have to have 5G. We cannot implement 4G and hopefully wait for 5G to implement 5G three, four years down the track, because then … we will be selling an obsolete product and people will be selling a market leading product of 5G and TPG spent all the money coming up with an obsolete product where the market is a 5G market. So it does not make commercial sense in that respect. That's why we keep saying that TPG must roll out with the 4G and the 5G solution now. Then down the track we're able to compete. Otherwise, there is no business case. Then we look at what we have. We only have 30 megahertz of the 3.5 gigahertz spectrum. And Mr Hanly presented to our board compared to the market today. Optus is selling the 5G, 50 megabit per second unlimited plan for $70, which is actually NBN replacement. Because NBN 50 megabit per second, TPG selling at 69.99. And then I look at - because we have 1.9 million fixed line customers. So one of the earlier idea is to go into mobile. Also, hopefully, we can migrate our non-profitable NBN business into our mobile, so that we … increase our profitability, because it is our net service. So we reduce the NBN cost component, which - like, 50 megabit NBN cost is about $45, and we hardly make $20 - less than $20. So … we have to move that NBN to the fixed wireless. There's one product we have to sell. Then we look at what we have - the 30 megahertz of the 3.5. We can't do it. Even I put up the 5G today, even there is a solution like what you say, there is no Security Ban, I put up the … 4G, 5G, I put up the Massive MIMO. I'm not able to do it even today, even to compete with Optus. And the market in three, four, five years' time, people demand for capacity, demand for speed, because of the user demand and also because of the technology development. So you envisage that the usage and the speed would go up. But what TPG has, there is a limitation because of the spectrum constraint that we have. So we will never get there. And what Telstra and Optus can do is keep driving us - this competition in Australia. I accepted this evidence of Mr Teoh. Other evidence supports this approach. 570 Dr Padilla considered that the low end or price sensitive segment of the market was already very competitive. He found that, not only were the MNOs competing in this segment with their primary brands, but also with their second brands. He also considered that the MVNOs were competing aggressively in this segment. Given this, and having regard to the nature of TPG's product, Dr Padilla considered that the impact of TPG's product offering was limited. 571 For these reasons, there is no likelihood or real chance that TPG's May 2018 offer would be competitive at some future point of entry. That is particularly so given that the alternative network design proposed by Mr Wright and advanced by the ACCC would see TPG entering the retail mobile market with a poor quality 4G product in an increasingly 5G world. 572 I briefly survey the expert economists' view of TPG's entry. I do not regard the view of the experts as decisive, and place much more reliance on the participants in the retail mobile market in Australia. 573 Dr Padilla's view was that TPG would have minimal competitive impact assuming its entry as an MNO. This is the view I prefer. 574 Dr Padilla expressed the opinion that TPG's entry would face severe limitations. To a large extent these reflect the reasons why TPG has decided it will not enter the retail mobile market and include the facts that: TPG would have significantly less coverage than the other MNOs and face high roaming charges; TPG's network would have poor quality and very limited capacity; TPG's expected pricing would have very little impact on competitive outcomes; and TPG would be later in supplying 5G. 575 Based on these constraints, Dr Padilla concluded: TPG would struggle to establish itself as a credible competitor, with even poorer quality than VHA and more limited coverage. TPG would be likely to only gain a presence at the low end of the market, which is already highly competitive. Moreover, TPG would not be expected to materially impact outcomes in the low end because of its expected poor quality, limited capacity, reliance on costly roaming (assuming it does obtain a roaming agreement) and very high cost to expand capacity given its limited spectrum holdings. 576 To put TPG's difficulties into context, Dr Padilla recalled Vodafone's significant and sustained loss of subscribers following Vodafail, and observed that TPG's network would have substantially worse coverage and quality than Vodafone's network. 577 In relation to the argument that TPG's threat of entry would benefit competition by prompting a competitive response from MNOs, this has already occurred. Mobile customers enjoy the benefit of that competitive shift, regardless of whether the merger proceeds or TPG enters absent the merger. This point was acknowledged by Mr Smith, where he acknowledged that competitive responses, such as the launch of Belong, lower contractual commitments, and SIMO post-paid plans are now just part of the competitive landscape. As Mr Smith put it (as I have mentioned), '[a]s you go through the history of how mobile phone pricing in Australia and other countries has evolved, once you let the genie out of the bottle it is difficult to go backwards'. 578 Dr Padilla also examined the limitations on Vodafone's ability to compete. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 579 In the future without the merger, Dr Padilla predicted XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. As Dr Padilla observed, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. Vodafone has significantly less spectrum than Telstra and Optus, Vodafone's own transmission network is limited forcing Vodafone to rely on third parties for transmission, XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 580 Dr Padilla concluded: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 581 Based on the evidence, Dr Padilla's assessment was that in the absence of the merger, and even assuming TPG's entry, 'there is a significant risk that competition in the retail mobile market would weaken'. 582 As to the limited competitive impact of TPG, Dr Padilla considered that the nature of the product TPG could offer as an MNO was limited in quality. Without roaming, TPG faced offering a mobile product which had limited coverage relative to the other three MNOs, was of poor quality and had limited capacity. The capacity of the TPG network limited the number of customers it could target. This limitation in turn had an impact on how aggressive TPG could be in its pricing. TPG would need to discount its prices simply to attract customers because of its poor quality. Further, once TPG had commenced acquiring subscribers, and as it neared its capacity on the network, it would need to cease pricing aggressively. 583 This is an important characteristic of many markets. XXXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXX XX. Pricing aggressively entails not only the incentive to do so but also ability. As Dr Padilla put it: [T]he incentives of a small operator to acquire new customers is not the only factor determining prices and, in an industry where economies of scale are important, smaller firms may not have the ability to sustainably offer lower prices because of the need to cover their total costs. The cost of supplying additional volumes is an important driver of prices in mobile markets and Optus has led recent price reductions, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 584 Mr Smith reached a different conclusion. His view was that TPG would exert an important competitive constraint on not only Vodafone but also the other MNOs. The reasons he provided were: (1) TPG has been an effective and successful competitor in adjacent markets, adopting an aggressive approach to pricing and introducing innovative retail products. (2) TPG would enter with aggressive, low priced offerings. (3) TPG had previously stated its intention to enter as an MNO, to provide innovative products, and to compete effectively with the existing MNOs. (4) TPG would have an incentive to enter into some form of network sharing agreement, possibly with Vodafone. (5) TPG would likely target price-sensitive customers located in metropolitan areas and TPG's customer base would likely overlap significantly with that of Vodafone. (6) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX . 585 Dr Padilla addressed these reasons as follows. He said, for example, that it is more relevant to address what TPG will be able to do upon entry, rather than to consider what TPG says it will do or has done in different circumstances. Moreover, at no point in Mr Smith's analysis of any of these factors did he come to grips with the fact that TPG's mobile product offering would be of poor quality and limited capacity. This has considerable implications. For example, TPG would simply need to discount its price to adjust for the quality of its product. A low priced product reflecting poor quality is not an aggressive price. Nor did Mr Smith adequately address the impact limited capacity will have on TPG's ability to price aggressively. His response was that it is 'reasonable to expect TPG would, like all other MNOs, assess its capacity requirements on an ongoing basis and update its capacity investment plans accordingly, including through the ongoing consideration of network sharing arrangements, and upgrades to newer, more efficient technologies'. 586 I note that Mr Smith accepted that the likely quality of the network is a factual question for the Court. I have already addressed this issue. Further, Mr Smith considered that poor network quality may be addressed by a roaming agreement and that the weight to be attached to network quality and coverage will likely vary by customer and that there may be some customers who are prepared to sacrifice quality in exchange for lower prices. Mr Smith considered that an inferior network quality may not be a material barrier to TPG winning the price-sensitive customers that it was targeting. 587 As to price and quality, I do not accept this conclusion of Mr Smith and prefer the analysis of Dr Padilla. To conclude that TPG would compete effectively with Vodafone and the other MNOs in the counterfactual, notwithstanding its inferior quality, would have required Mr Smith to identify a customer segment which he considers would be attracted to such a product. I do not consider Mr Smith's views are persuasive without further knowledge about such things as the nature and extent of the quality differences, the extent to which there would be customers who would be prepared to sacrifice network quality for a lower price, the extent to which TPG would need to discount price to compensate for the quality differential, whether the discounted price would be sustainable, and the impact TPG's offering would have in the market, having regard to the existing state of competition. In addition, and significantly, poor network quality would not be addressed by a roaming agreement in the circumstances of TPG entering into the market in the future.

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The submissions of the ACCC 588 The ACCC submitted that the evidence establishes that: (1) Vodafone has, since Vodafail, significantly improved its network and the quality of the mobile product it offers Australian consumers to the point where, as stated by Mr Berroeta, its position is one of 'strength and momentum'; (2) Vodafone has already taken steps to manage congestion and has a well-developed RAN Refresh program that will be rolled out XXXX XXXX XXXX XXXX XXX, along with other works on its network; (3) Vodafone's program of works is costed and fits within its existing capex envelope (no increase in the levels of shareholder support is required); (4) the likely congestion on Vodafone's network is at significantly lower levels than the levels assumed by Vodafone's lay witnesses, and which levels underpin their concerns about Vodafone's competitive position in the future; (5) Vodafone intends to roll-out its RAN Refresh program more quickly than the pace which was assumed in Vodafone's modelling of when congestion will peak and how many sectors would be 'congested' before congestion eases; (6) even at what Vodafone contends are high levels of congestion, the network performance still allows the vast majority of users to stream content at recommended speeds; and (7) Vodafone has the continued support of its shareholders whose commitment to supporting Vodafone has been repeatedly reiterated - neither of the shareholder witnesses sought to resile from those statements. 589 As such, in the ACCC's submission, the Court ought not to accept the negative prognostications of Vodafone's lay witnesses as anything more than statements of concern. The ACCC contended that the facts do not bear out the opening contention that Vodafone will cease to be an effective competitor against Telstra and Optus if the merger does not proceed. 590 The ACCC contended that it is important to be clear at the outset about what Vodafone means when it talks about 'congestion'. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX as 'the point at which users are more likely to notice the effects of a decline in network performance'. 591 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 592 So it was contended by the ACCC that where Vodafone describes a site as 'congested', it does not necessarily follow that the experience of customers is adversely affected. Identification of a site as 'congested' serves, rather, as a 'canary in the coalmine' to alert Vodafone to the need to take remedial action and to raise that alert in sufficient time for it to be acted on - as Vodafone is doing and will continue to do. 593 Then, the ACCC contended Vodafone currently competes strongly in the retail mobile market, particularly in metropolitan areas. Over the past five years, Vodafone's share of the Australian retail mobile market by mobile handsets supplied has been 18%. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. Its EBITDA is also increasing. Its share of the retail mobile market in metropolitan areas is significantly higher than its overall share. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 594 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. Vodafone accepts that geographic coverage is only one factor across which MNOs compete: others include price, service quality, service add-ons and retail support. 595 It was submitted that it is Vodafone's ability to continue to compete in these current areas of focus that is relevant to the Court's consideration of Vodafone's position if the merger does not proceed; analysing Vodafone's market share by reference to the whole of Australia is apt to mislead. 596 Since Vodafone's response to Vodafail, customer perception of its network has improved. Following Mr Berroeta's arrival in the wake of Vodafail, Vodafone has gone from being the most-complained about mobile service provider to being, 'for the last three years, probably', the least-complained about mobile service provider. It has the lowest rate of complaints and the highest net promoter scores among the MNOs. In the first quarter of 2014, the rate of complaints to the Telecommunications Industry Ombudsman made by Vodafone customers was almost 2.5 times the industry average. In the first quarter of 2019, it was around 2.5 times lower than the industry average. In his expert report, Mr Smith observed, consistently with Mr Berroeta's evidence, that Vodafone's complaint rate has declined to the point where in the second quarter of 2019, it was assessed at 2.7, compared to 7.2 (Telstra), 7.7 (Optus) and 6.6 (industry average). In Vodafone's 2019 budget it is stated that Vodafone was the 'least complained about telco in 2018', and had a net promoter score five points ahead of Optus and 18 points ahead of Telstra. Mr Berroeta accepted that the quality of experience for Vodafone's customers has not fallen below an acceptable level. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 597 Vodafone presently maintains a competitive offering, particularly in metropolitan areas, and will continue to do so, and compete effectively with Telstra and Optus. 598 In its written opening submissions, Vodafone stated that 'Vodafone's access to funds for capital expenditure is constrained'. However, the ACCC pointed to the evidence that: (1) Vodafone will likely have a capex budget (excluding spectrum) for 2020 and following years of at least XXX XXXXXXX; (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 599 Therefore it was submitted that in the future without the merger Vodafone will continue, as it has done in the past and is doing presently, to apply its capex to maintain and upgrade its network, and address congestion in order to remain competitive. 600 It was submitted that it is an inevitable part of being an MNO that money must be spent on network and spectrum. Just as Vodafone's shareholders supported the necessary capital to maintain a competitive network in response to Vodafail, so too they are supporting Vodafone's continued investment in its network and may be expected to support Vodafone's participation in future spectrum auctions, subject to establishing bidding limits having regard to the business case presented. 601 Vodafone's shareholders have a clear incentive to support capital expenditure to maintain Vodafone's competitive position. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 602 Vodafone's other shareholder, Hutchison Telecommunications (Australia) Limited ('HTAL') - an ASX-listed subsidiary of CK Hutchison Holdings Limited ('CKHH') - recently confirmed its commitment to supporting Vodafone in an announcement to the ASX, in which it stated that it 'remains committed to Vodafone and will continue to support Vodafone in the future'. This statement of support is consistent with other positive statements HTAL has made about Vodafone. In statements to the ASX, HTAL has said that 'Vodafone continues to perform strongly in a competitive environment' and that 'Vodafone is well-placed to continue achieving steady, modest customer growth'. Vodafone Group's 2019 Annual Report stated that Vodafone 'continued to perform well in a competitive environment'. Similar statements of shareholder support are expressed in Vodafone's most recent annual report (dated 31 December 2018, but confirmed by the Vodafone Board on 21 February 2019), which made reference to the continuing 'backing of its ultimate shareholders'. The substantial majority of the members of the Vodafone Board are non-independent nominees of the shareholders; their position necessarily reflects the position of the shareholders. 603 When the intended merger was announced, Mr Berroeta described Vodafone as 'a company with a track record of reliability, stability and a fantastic customer experience which has seen the business prosper', and that it is in 'a position of strength and momentum'. 604 Furthermore, the ACCC submitted that it should not be overlooked that a substantial contribution to Vodafone's recent net losses has been made by the guarantee fees charged to it by its own shareholders' parent entities. These have accrued at about $150 million each year, in circumstances where, for example, Vodafone's loss in 2017 was $177.8 million and in 2018, $124.4 million. In 2018, the shareholders received the benefit of the guarantee fees when the close out of a cross-currency swap was applied to pay down the guarantee fees which had accrued: 'guarantee fees payable to shareholders' decreased from $768 million to $7 million. 605 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 606 Further, it was contended that there is no evidence that Vodafone's shareholders will not support future spectrum acquisitions and renewals. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 607 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 608 It was also contended that the Court should not find (as Vodafone appears, by Mr Berroeta's evidence, to invite it to) that the bidding envelope that the shareholders will approve in the future will be insufficient to win future auctions. While the approved bidding envelope for the 2 x 10 MHz of 700 MHz spectrum was not high enough for Vodafone to win that auction (in which TPG won the spectrum at an internationally unprecedented price), on other occasions, the shareholders have approved bidding envelopes which far exceeded what was required to win. For example, the 2 x 5 MHz of 700 MHz spectrum was purchased by Vodafone at that auction for the reserve price of $286 million, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. Similarly, XXXX XXXX XXXX XXXX XXXX XXXX XXXX for the joint venture with TPG of XXX XXXXXXX, whereas the price paid was $263.3 million. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 609 The ACCC contended that the Court cannot assess the competitive position of Vodafone on the basis that it will be affected by congestion reaching a point where it is required to shed market share (so as to maintain an acceptable quality of service). Nor can the Court be satisfied that congestion will otherwise impinge on its commercial offerings or customer experience. 610 While the ACCC accepted that data usage is growing, the ACCC contended that Vodafone's case rests on an overstatement of the expected CAGR. Vodafone stated that it is facing a CAGR of data usage on its network of XXX. This is the figure that Mr Berroeta adopted as his understanding of the current CAGR, based on his discussions with Vodafone's technology team. The CAGR figures, which Vodafone invites the Court to accept as projections of the likely future growth and impact on its network, are drawn from Vodafone's work to model congestion for the purposes of its network upgrade. 611 The ACCC contended that the expected CAGR is important because forecast data growth assumptions are critical inputs to Vodafone's 'Business Volume Metric' ('BVM') and to Vodafone's network planning. These assumptions underpin much of Vodafone's case about the congestion difficulties it faces in the future without the merger. Because the CAGR is a compound rate, what appears to be only a small difference can have a large effect on projections over the next five years. Changing the CAGR from XXX XX XXX nearly halved the projected number of congested sites in Mr Lopez's top 12 analysis. 612 Vodafone finalised two BVMs in May 2019: one with a XXX CAGR forecast, and the other with a XXX CAGR forecast. These CAGR forecasts were calculated by Mr Sivagnanam and his team. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. The forecasts underpin recent congestion modelling undertaken as part of the RAN Refresh planning, which Vodafone seeks to rely on to XXXX XXXX XXXX XXXX XXXXX XXXX XXXX. 613 The ACCC submitted that neither the XXX XXX XX CAGR projections accurately reflect the likely CAGR of data usage over the next five years, and that as a result the Court should not accept that Vodafone's congestion problem is as serious as Vodafone suggests, nor that congestion will hobble Vodafone rendering it unable to continue to act as an effective competitor to Telstra and Optus. 614 Mr Sivagnanam explained that he came up with the CAGR forecasts using both a 'top down' and 'bottom up' approach, and that central to the 'top down' analysis were certain CAGR forecasts for mobile data traffic published by equipment vendors. However, the ACCC contended that: (1) none of those industry reports focused on Australia; (2) none of them contained a forecast CAGR as high as XXX; (3) while it was Mr Sivagnanam's practice to focus on countries with higher 4G data penetration, such as the US - 'because historically mobile data growth in Australia has followed trends in North America' - he cited a global CAGR forecast from one industry report despite that report also containing a lower CAGR forecast specifically for North America; and some reports reflect anomalous data or data which are not informative of the position reasonably to be expected in Australia in the coming years - for example, high global monthly data traffic growth between the fourth quarter of 2017 and the fourth quarter of 2018 XXXX XXXX XXXX XXXXX XXXX XXX relied upon by Mr Sivagnanam, was driven mainly by increased traffic per smartphone in China. 615 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX the ACCC submitted that the Court should reject any suggestion that Vodafone will need to contend with a XXX CAGR for data. That is also supported by the evidence of Mr Wright that in his experience over time the CAGR for data growth was between 30% and 40%, although it was 'not uncommon to have a year or something of high growth' and that '[u]nlimited plans will probably see a spike in consumption, then stabilising again'. XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 616 Even the 'lower' CAGR projection used for network planning purposes, XXX - which was calculated based on lower customer growth projections - was shown in cross-examination to be excessive and involve miscalculations which inflated the result. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX: (1) XXXX XXXX XXXXX XXXX XXXX XXXX (2) XXXX XXXX XXXXX XXXXX XXXXX XX (3) XXXX XXXXX XXXX XXXXX XXXX XXXX XX (4) XXXXX XXXX XXXX XXXX XXXX XXXXX. 617 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 618 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 619 While these errors and biases to high CAGR projections may not have mattered to Mr Sivagnanam and his team XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX, it was submitted by the ACCC that they do matter when Vodafone invites the Court to rely on them to found submissions that, in the absence of the merger, Vodafone will experience rising congestion beyond its capacity to address, and which will cruel its competitive position. 620 The ACCC contended that the likely position is, in fact, less grave than Vodafone portrays it to be, even in its most recent modelling. That up-to-date modelling is set out in a 'RAN Refresh update' presentation dated 29 July 2019. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX; (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 621 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 622 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 623 The ACCC submitted that, given: (1) the XXX CAGR projection used in Vodafone's congestion modelling does not correspond with what Vodafone expects to occur XXX XXX XXXX XXXX XXXX XXXX; and (2) both the XXX XXX XXX XXX CAGR projections used in Vodafone's congestion modelling are erroneously high; the Court should not be satisfied that the congestion problem Vodafone faces is as serious as Vodafone suggests. 624 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX, meaning that it is doubtful Vodafone's competitive position would be adversely affected materially or for any duration. In any event, Vodafone's network will over the next five years provide a service of sufficient quality for the vast majority of Vodafone's mobile customers. 625 The ACCC contended that just because a site is deemed 'congested' does not mean that the user's experience falls below acceptable levels. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. This is faster than Netflix's recommendation for streaming in standard definition 360p (1.5 Mbps). Similarly, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX, and thus sufficient for standard definition Netflix. It is common ground that streaming is 'data hungry'; thus, the experience of users who are not streaming is even less likely to fall below an acceptable level. 626 In addition, because Vodafone's network planning is based on a CAGR XXXX XXXX XXXX XXXX XXXX XXXX XX, over the relevant timeframe its network is likely to have excess capacity. 627 It was also submitted by the ACCC that in addition to the fact that there is no evidence that congestion has yet had any appreciable negative effect on the experience of its customers, Vodafone has taken, and is continuing to take, concrete steps - XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 628 Mr Berroeta accepted in cross-examination that Vodafone is 'doing many things' to address its congestion difficulties. As well as acquiring new spectrum, Mr Berroeta stated in his affidavit that Vodafone has re-deployed almost all of its available spectrum to the 4G network (which has involved the closure of Vodafone's 2G network and ongoing migration of its 2100 MHz spectrum from its 3G network to its 4G network), upgraded its RAN equipment and deployed new antennas to add capacity to existing sites, upgraded its core network to provide more capacity, and upgraded its backhaul transmission network. Mr Sivagnanam explained that six major projects over the past three years have looked at how to increase Vodafone's RAN capacity. 629 The ACCC contended that the RAN Refresh program is a key part of Vodafone's response to congestion. It will take place whether or not the merger proceeds. It fits within the capex envelope approved by Vodafone's shareholders. 630 As part of the RAN Refresh, Vodafone will swap certain of its 4G Huawei equipment and add capacity to its network and enable upgrade to and roll-out of 5G equipment. According to the most up-to-date document setting out details of the RAN Refresh plans: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 631 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 632 In the ACCC's submission, it is likely that Vodafone will do more than carry out its RAN Refresh program to address congestion: to the extent that Vodafone believes it will be better able to address congestion if it shares the costs of infrastructure or spectrum in the future with the merger, it follows that it has an incentive to pursue cooperative arrangements, such as network and spectrum sharing. Two such arrangements are prominent in the evidence: the eJV with Optus and the joint venture with TPG. 633 Under the eJV, there is a common grid XX XXXXXX XXXXX, which both Vodafone and Optus use in their networks. Although the eJV excludes new technologies covered by 5G, Mr Berroeta's view is that it would be highly desirable for it to cover any future 5G network. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XX creates a very strong incentive to extend the eJV: without an extension, Vodafone and Optus would effectively be forced to build greenfield sites to support their 5G networks. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 634 The ACCC submitted that, in these circumstances, it is highly likely that Vodafone and Optus will agree to extend the scope of the eJV to cover 5G. 635 The ACCC then turned to the joint venture agreement between TPG and Vodafone: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 636 The ACCC contended that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX. 637 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. Mr Sixt accepted that Vodafone and TPG would look at participating together in future spectrum auctions on a case-by-case basis, and that the joint venture agreement 'maintained a framework for discussing … possibilities' well beyond the acquisition of 3.6 GHz spectrum. His evidence about network and infrastructure sharing was that 'sensible commercial parties' such as Vodafone Group and CKHH are 'always open … to exploring commercial alternatives'. 638 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 639 The ACCC contended that the evidence of Vodafone's willingness to consider cooperative arrangements is consistent with the point made by Mr Smith that, if Vodafone and TPG believe they will gain 'substantial benefits' from combining their network assets and spectrum holdings in the merger, it follows that, in the future without the merger, Vodafone and TPG would still have strong incentives to pursue, through some form of network sharing, these same benefits. Mr Wright also notes that network sharing is one of the options Vodafone could pursue to address congestion absent the merger. He suggests Vodafone would likely take an approach involving one or more of: managing marketing and plans to reduce traffic growth; executing network modernisation plans; funding higher levels of capex to 'de-risk' the transition period to 5G; deploying 5G in areas of greatest need; seeking additional mid-band spectrum; leasing spectrum from TPG; and entering into a network sharing arrangement involving active sharing (in the form of Multi Operator Radio Access Network ('MORAN') or Multi Operator Core Network ('MOCN')). 640 The ACCC submitted that Vodafone's interest in sharing was, and is, real. The Court ought, in the ACCC's submission, act on the evidence found in Vodafone's business records as to its actual interest in sharing, rather than on Dr Padilla's opinion that Vodafone would (in his view) have no interest in sharing or in any way assisting TPG. 641 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 642 In the ACCC's submission, the Court should proceed on the basis that the extension of the eJV is likely to occur. As to sharing more broadly, the evidence shows that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. Accordingly, the Court cannot assess the future without the merger on the basis that Vodafone has no options available to it to augment its sharing arrangements, or that any such options would be rejected out of hand by its shareholders. 643 The ACCC then made submissions on 5G and the claimed impediment of being 'late' to 5G made by Vodafone. 644 The ACCC noted that Vodafone is rolling out 5G equipment as part of its RAN Refresh program and will, in future, offer 5G services. However, Vodafone says that, as a result of the Security Guidance, it will not be able to deliver 5G services until after Telstra and Optus, which will put it at a competitive disadvantage to those operators. (Vodafone describes this as being 'late' to 5G, regardless of the level of 5G device penetration or whether any use cases for 5G are available to customers). The ACCC contended that the fact is, as Mr Berroeta accepted in cross-examination, Vodafone was always going to be 'late' to 5G; being 'late' to 5G was not a function of the Security Guidance. 645 The ACCC submitted that Vodafone was always going to be 'late' to 5G because its plan to move to 5G was driven by congestion planning - ie having the 5G network built up so as to take over load from the 4G network. But for the 5G network to fulfil that objective, handset penetration among the customer base needs to rise to a level where a sufficient number of customers have 5G enabled handsets. 646 Prior to the Security Guidance, in June 2018, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 647 The ACCC submitted XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 648 It is only in the context of this contested merger that consumer preferences for 5G appear to take on significance in Vodafone's thinking. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. As Mr Bromhead observed, generations of technology develop and mature over many years - the benefits to Telstra and Optus of being first to announce 5G offerings, however limited, are unproved, but easily overstated. 649 The ACCC contended that the evidence indicates that, in any event, the real benefits of 5G are some way from being realised. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. There are only limited numbers of 5G compatible handsets on the market. His evidence is also consistent with that of Mr Bromhead of Ericsson that 'today the benefits of 5G over 4G are limited', and that those benefits would increase but that it typically takes technologies ten years to mature. Further, there is evidence that 5G services may not be as important for price-sensitive customers, because such customers 'tend to be focused more on price and the level of data allowances'. 650 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 651 As to Vodafone's position in the corporate and government sector, the ACCC pointed out that Vodafone's fixed business is in the early phases of its evolution, and is being expanded gradually. It was only launched in December 2017, and cannot be considered a 'mature' business whose full potential has been realised. 652 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. It has the capacity to grow the sophistication of its fixed offering, if it sees advantage in so doing. For example, Vodafone has not, but could, consider the opportunities NBN's move into Enterprise Ethernet may provide. Mr Berroeta accepted that such a move may present an opportunity for Vodafone to offer a higher grade of fixed service to business customers. 653 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. The directors' notes to the Vodafone 2018 year-end financial report suggest that Vodafone is making inroads, and signing 'major business customers across a variety of industries'. Further, even if Vodafone's offering does not meet the needs of some large corporate and government clients, they represent only a portion of the business sector, and that sector is only a very small part of the retail mobile market as a whole. 654 The ACCC pointed to the evidence of Mr Davies, of Macquarie Telecom Group Pty Ltd, that some customers would choose more expensive, higher coverage plans for some staff, and use lower cost plans elsewhere to reduce their overall costs. He also gave evidence that in the last six or seven years there has been a trend away from bundling in the business sector, and a 'propensity to, perhaps, consume mobility from a different provider to the data network'. 655 In the ACCC's submission, the Court should not make much (if anything) of Mr Berroeta's evidence or the limited and ad hoc collection of emails tendered by Vodafone which mention the customer wanting a 'whole of business' solution (in most cases along with other matters). Nor can Dr Padilla's evidence rise above the evidence and assumptions provided to him, which were based on Mr Berroeta's affidavit. It was submitted that in order for the Court to reach any conclusions on the relative importance of the ability to offer a sophisticated fixed service to winning corporate and government mobile business, a much closer analysis is required of the relevant requests for proposal ('RFP'), Vodafone's response to them and the extent to which RFPs permit (or the client permits) the proffering of a mobile-only solution would be required. 656 In the ACCC's submission, over the next five years, Vodafone will remain an effective competitor to Telstra and Optus, particularly in metropolitan areas. Partly this is because, as has already been identified, Vodafone's congestion difficulties are not as severe as Vodafone suggests they are. It is also because Vodafone is, in any event, acting to address these difficulties, and will continue to do this absent the merger. This evidence undermines Dr Padilla's opinion that Vodafone in the future without the merger will become less competitive. That opinion rests on the view that 'with limited resources available to invest, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. The evidence indicates that this view is wrong. Dr Padilla's opinion should be considered in that light. 657 It was submitted by the ACCC that there is scant evidence that Vodafone is managing, or will in fact have to manage, its offering to shed any segment of its customers so as to relieve demand on its network. Its suggestions that it will need to do this in the future are unsubstantiated. Mr Pham's evidence was that since July 2018 Vodafone has, at times, not directly matched Telstra or Optus offers because of concerns about the impact of increased data usage on Vodafone's network. However, the ACCC submitted that: (1) the evidence is that, to date, Vodafone has been able to manage its congestion and still maintain a competitive offering; (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX (3) Mr Wright's view that 'demand management' may be appropriate for Vodafone was XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 658 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. The ACCC submitted that the Court should not make any finding, based on such speculative evidence, that, in the future without the merger, Vodafone will be a materially weaker competitor, particularly where XXXXX XXXX XXXX XXX XXX XXXX XXXX XXXX XXXX has been shown to be wrong. 659 While Vodafone will clearly not be among the first MNOs to offer 5G services, the alleged competitive impact of that position is unsubstantiated and this Court cannot be satisfied it would be material. Moreover, this is a fact whether or not the merger proceeds. 660 It was submitted by the ACCC that Vodafone will continue, as it has, to focus on making competitive offers to metropolitan mobile consumers, while seeking to grow its enterprise unit, supporting those efforts with its program of works on its RAN, as well as the myriad other business initiatives which Vodafone pursues to differentiate itself in the market. 661 The ACCC made the following further submission. Mr Smith identified that other claimed efficiencies relied on by Dr Padilla were purely pecuniary effects which might result in increased revenues or costs savings for MergeCo relative to Vodafone and TPG on a stand-alone basis, but are unlikely to or may not have any material impact on the ability of MergeCo to compete in the retail mobile market. He considered that there was insufficient evidence to conclude that any merger specific benefits would have a substantial positive effect on competition in the retail mobile market.

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Consideration of the position of Vodafone 662 To understand the competitive position of Vodafone in the retail mobile market today it is necessary to have regard to the company's fortunes over the past decade. When Vodafone was formed in 2009, its shareholders contributed X XXXXX in equity to Vodafone for the purpose of enabling the company to build scale and grow its customer base. However, as already noted above, commencing in December 2010 and continuing for a number of years, Vodafone experienced a period of serious network issues arising from a variety of factors. These issues resulted in Vodafone customers experiencing high rates of dropped calls and poor internet activity, and attracted substantial adverse publicity. This event - namely, Vodafail - resulted in Vodafone losing approximately two million customers and significant market share. 663 In the years immediately following Vodafail, Vodafone invested heavily in its network in an effort to recover. In each of 2013 and 2014, Vodafone's capex exceeded $800 million, and that expenditure was funded through external bank debt guaranteed by its shareholders Vodafone Group and Hutchison Whampoa Ltd (now its successor, CKHH). Vodafone's market share has never completely recovered from Vodafail. 664 As already noted, Vodafone's business is not, and has never been, profitable. It has made losses exceeding $100 million in each of the last five years and has net assets of XXX XXXX. Vodafone's net debt has increased each year over this period, and now totals approximately XXXX XXXX. Of that net debt, approximately XXXX XXXX is owed to third-party banks (through a wholly-owned subsidiary of Vodafone) and is guaranteed by Vodafone's shareholders, Vodafone Group and CKHH. That external debt is around seven times Vodafone's EBITDA. Vodafone is balance sheet insolvent and relies on letters of support from its shareholders in respect of its external debt to continue as a going concern. 665 I accept that a significant aspect of Vodafone's poor financial performance in recent years is that the business has only occasionally realised positive free cash flow on an annual basis. In the years 2012 to 2018, Vodafone recorded positive annual free cash flow only twice (in 2016 and 2018). As Mr Badrinath, a director of Vodafone explained, free cash flow is an important indicator of the financial health of Vodafone because a positive free cash flow result indicates that Vodafone is able to finance its own capex and spectrum requirements, and to service its debts. Conversely, a negative free cash flow result indicates that, in any given year, Vodafone has been unable to support itself on a standalone business, which is not sustainable over time. 666 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 667 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X. 668 The ACCC contends that Vodafone's financial difficulties were overblown. It was suggested to a number of witnesses, for example, that Vodafone had 'headroom' on its working capital facility and could draw down further on that facility to fund future capex. Any further draw down on working capital would only further enlarge Vodafone's debt. Mr Sixt explained that the purpose of a working capital facility is to finance working capital, which fluctuates with the company's day-to-day operations. Mr Sixt acknowledged that working capital facility is large, but that is because it is 'meant to ensure that in the theoretical emergency', the company could access funds quickly. 669 To date, Vodafone's shareholders have contributed XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXXX X. As Mr Sixt explained, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 670 The effect of Mr Sixt and Mr Badrinaths's evidence was that Vodafone's shareholders, CKHH and Vodafone Group, are rational commercial entities that seek to derive returns on their investments. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 671 Even if there were a realistic prospect that further investment in Vodafone would result in a meaningful return on investment, there are practical limits on CKHH and Vodafone Group making such an investment. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 672 Obviously, without the merger, Vodafone's shareholders will require the company to take steps to become increasingly self-sufficient by reducing expenditure (including capex) so as to lower its costs to a point that they can be met from free cash flow. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 673 There is a volume of evidence of the types of measures that may be necessary in order for XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. As Mr Wright explained, the means by which demand for data can be managed on a network include raising prices or lowering quality (whether by capping plans, slowing download speeds or de-prioritising certain customers in busy periods). 674 I am satisfied that Vodafone will be required to 'make the best of it' in the future as Mr Sixt described because that has been the shareholders' directive to Vodafone for some time. Mr Berroeta's evidence was that, over the past five years, the shareholders had consistently conveyed to him that capex was to be reduced; that Vodafone should not seek increased funding from the shareholders or support for more external debt; that it was not sustainable for the shareholders to continue to support high investments in Vodafone with no return; and that their priority was for Vodafone to become a self-sustaining business. In response to those discussions, Mr Berroeta has conducted the business of Vodafone on the basis that requires the company to not increase its overall debt burden, to maintain capex within the current XXXXXX XXX per annum budget and to limit and reduce its costs. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 675 In the directors' report that forms part of its 2018 financial statements, there were positive statements made about Vodafone's future. Those were statements that: 'VHA is well-placed to continue achieving steady, modest customer and financial growth, despite ongoing aggressive competition among the Mobile Network Operators' and 'in 2019, VHA will continue to invest in innovative, competitive mobile and fixed services and products which offer value inclusions and flexible options to Australian customers'. The prospect of modest growth despite aggressive competition is a warning of difficulties ahead. That is particularly so when one has regard to the context of these statements in the document as a whole. The financial statements reveal the financial challenges facing Vodafone in complete numerical detail. I do not regard the observations of the directors as expressions on unequivocal positivity. Vodafone is continuing to achieve modest gains, and to invest in its business. There is a realisation though that the challenges it faces are significant. 676 I accept the submissions of the ACCC that the 'financial difficulties' may be overcome by shareholder support, and this has been forthcoming in the past. However, I now have evidence which puts this shareholder approach in a different light, and I would expect it to be conducted in accordance with the observations of Mr Sixt. 677 Therefore, it seems Vodafone faces financial difficulties that are unlikely to materially change absent the merger, and those financial difficulties will limit the extent to which Vodafone can invest in, and grow its business, in the counterfactual. Then, given its financial situation, in a world without the merger, Vodafone would likely XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 678 Without the merger, Vodafone's 5G roll-out over the next XXXX XXX will be limited in scope. The Security Guidance delayed Vodafone's plans, requiring it to find a new vendor and to swap out all Huawei equipment from sites to be updated to 5G. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 679 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. As the next major technology generation change takes place, Vodafone will increasingly become a less effective competitive constraint on Telstra and Optus. 680 With shareholder support (which I have already mentioned) Vodafone's financial difficulties have real competitive consequences for Vodafone given the capital-intensive nature of the retail mobile market. An MNO must constantly invest in its network, so as to introduce new technology and products, improve service and expand network capacity (including by acquiring spectrum and building and upgrading sites). 681 Whereas mobile devices were once limited to making telephone calls and sending text messages, today they are used for such things as browsing the internet, streaming music and video and live-streaming video calls. These more recent uses are much more data-intensive and have driven large increases in the amount of data used on mobile networks. 682 In recent years, the rate of data usage on Vodafone's network has been growing. Vodafone's actual data growth rate was XXX in 2016, XXX in 2017 and XX in 2018. In the 12 months to June 2019, the total data carried on the network grew by XXX compared to the preceding year. These high growth rates appear to reflect a general trend towards greater data usage on mobile networks, with Telstra reporting in 2018 that it was experiencing traffic growth on its network of 50% year-on-year. 683 These high rates of data growth have implications for Vodafone's level of competitiveness in the future without the merger, as the volume of data traffic on a mobile network affects service quality. 684 The capacity of any given sector of a base station to provide a mobile service to customers is limited. The capacity of a sector varies depending on the spectrum deployed on the base station site. In 4G LTE networks, such as that operated by Vodafone, the measure of a sector's capacity is a 'physical resource block' ('PRB'), and the extent to which the capacity of a sector is being used at any time is measured as a percentage of the total PRBs that are being utilised. In general, as capacity utilisation increases, the average download throughput speed from the sector decreases. 685 At very high levels of utilisation, a sector will deliver a noticeably degraded service to customers. Vodafone, for example, operates on the basis of an objective that, at a minimum, it must ensure that customers realise a data speed of X XXXX to all of its customers (including during the network's busiest times), which equates to the throughput necessary to permit customers to stream XXXX XXXX XXXX video. To ensure that all customers served by a sector receive that quality of service, Vodafone must ensure that the average busy hour download throughput on a sector is X XXX, as this equates to roughly X XXXX at the edge of the sector's coverage. Historically, Vodafone has regarded a utilisation rate of XXX in the busy hour as the critical threshold for ensuring that Vodafone can continue to deliver this minimum service level. In other words, Vodafone has treated a PRB utilisation rate of XXX as the point above which a sector will no longer be providing acceptable service to customers. 686 Mr Sivagnanam detailed how customer experience is affected at various threshold utilisation rates. At utilisation rates of XXX to XXX, Vodafone's analysis is that it would be failing to deliver its objective of a minimum service standard of X XXXX to approximately XXX of its customers served by that sector. At utilisation rates of XXX to XXX, Vodafone would be failing to deliver its minimum service standard to XXX of its customers served by that sector. And, at utilisation rates above XXX, around XXX of Vodafone's customers would be receiving a service below Vodafone's minimum service standard. 687 Vodafone has adopted a minimum service level of X XXXX. This is a baseline below which Vodafone aims not to fall. The evidence is that some services that customers demand and use (such as video calls) require throughput speeds well above 1.5 Mbps. 688 Given the impact that a lack of capacity can have on service quality, Vodafone has historically treated a utilisation rate of XXX for a given sector as a trigger point for scheduling a site upgrade of the affected site. More recently, it has increased this threshold to XXX in a move that Mr Sivagnanam described as a 'calculated risk'. 689 However, whatever threshold is used, that the number of sites on Vodafone's network that are 'congested' (in its terms) has grown substantially in the past two years. 690 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXXX XXXXX XXXXX XXXXX XXXXXX XXXX XXXXX XXXXX XXXXX XXXXX XXXXX. 691 This trend towards increasing congestion on Vodafone's network is anticipated to continue into the future. In the ordinary course of its business, Vodafone prepares forecasts of the anticipated future increase in traffic on its network (a metric it refers to as the 'BVM'). The most recent BVM was adopted in May 2019. At that time, Vodafone adopted a lower range BVM with traffic growing at a CAGR of XXX and an upper range BVM with traffic growing at a CAGR of XXX. 692 I find that the data CAGRs of XXX and XXX were appropriate and realistic forecasts of the lower and upper bounds of expected data volume growth on Vodafone's network in the next five years. I accept that the capacity crisis identified by Vodafone is a proper estimate. 693 On the basis of that BVM, Vodafone has commenced planning to upgrade its network to the extent possible within its capex constraints. It has undertaken modelling using the BVM and calculated that, if it does nothing to redress its congestion issues in the next two years, as many as XXXX XX sites in Vodafone's network would be congested (ie would experience more than XXX utilisation in the busy hour) by 2021. 694 Data growth on its network continues to increase, leading to greater congestion. That congestion is already at levels where customers will be impacted, and the number of congested sites is forecast to continue to grow. The evidence demonstrates that, absent the merger, Vodafone lacks the financial resources to upgrade enough sites fully to redress its capacity problems, other than upgrading sites in XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 695 In circumstances where Vodafone cannot wholly redress its mounting congestion problems by way of site upgrades (or buying more spectrum), the likelihood is that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X. 696 Without the merger, Vodafone will have limited ability to increase its network capacity. Mr Wright has given evidence that Vodafone will need to implement demand management strategies 'within months'. Potential demand management strategies that Mr Wright has described include: (1) increasing prices; (2) ceasing to offer unlimited plans; and (3) throttling data speeds. 697 Mr Wright explained in his oral evidence that, based on the growth that Vodafone was seeing, he considered that Vodafone would 'need to think of ways to repackage plans to reduce that growth to a more acceptable level'. Mr Wright agreed that there would be a number of ways for Vodafone to do this, including increasing its prices, capping data allowances or slowing data speeds at the end of a plan allowance. He agreed that, ultimately, Vodafone had to act to get customers to use less data. Mr Wright stressed that if an MNO has limited network capacity, it would want to manage the rate at which data growth is occurring. 698 Mr Wright also agreed that there is a fairly immediate need for Vodafone to manage demand, as part of a portfolio of actions to confront its congestion problems. Mr Wright said that he would anticipate that Vodafone would look at changing plans and look at different product constructs from what they already had put in market 'so that new customer acquisitions had a different profile of demand on the network'. Mr Wright expected that Vodafone would want to take such steps reasonably quickly (as noted already, 'within months'), given Vodafone's delays 'in doing their modernisation on their network'. Mr Wright emphasised that taking steps to alter terms and conditions for products is a form of demand management that an MNO can do much faster than acquiring spectrum or building new sites. 699 Mr Berroeta also stated that Vodafone would need to consider to manage congestion if the merger does not proceed. Additional options canvassed by Mr Berroeta include: Network prioritisation for high data users during peak mobile usage periods. Placing restrictions on certain products (such as restricting endless data plans to smart phones only, or to prevent tethering). Limiting the supply of wholesale services to MVNOs. 700 A number of other Vodafone witnesses gave evidence that absent the merger, Vodafone would need to focus on serving and retaining only its most profitable customers: Mr Sixt stated that: (1) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. (2) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: (3) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX Mr Bley, in his affidavit, stated: A key metric I have regard to in making pricing decisions is average revenue per user (ARPU). XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 701 Adopting any of the demand management options referred to above will adversely affect competition in the retail mobile market. 702 I turn then to the issue of network sharing to alleviate Vodafone capacity problems. 703 I do not accept that network sharing would be a means by which Vodafone can address congestion and that Vodafone and TPG would have strong incentives to pursue some form of network sharing absent the merger. 704 Mr Smith could not provide details as to what the network sharing deals to alleviate Vodafone capacity problems might look like. He could not say, for example, whether they would be MORAN and MOCN arrangements - that was a level of detail he was not familiar with and on which he would defer to technical experts. Mr Smith accepted that he could put the network sharing hypothesis no higher than that it was a theoretically possible course in the counterfactual, but one in respect of which he could offer no detail. Mr Smith could not identify any form of network sharing agreement that would address Vodafone's network capacity issues or would replicate the advantages that would flow from the merger. 705 Mr Wright addressed two types of active network sharing - MORAN arrangements, where two or more MNOs share the active elements in the RAN base stations, but do not share spectrum; and MOCN arrangements, where one or more MNOs share both the active elements in the RAN base stations and spectrum. 706 Mr Wright's evidence was that there was no prospect of Vodafone and TPG agreeing a MORAN arrangement absent the merger. He explained that conclusion this way: The reason I took that view is that when I looked at the macro network requirements for TPG with the spectrum they own, on the Vodafone and almost any other macro network cell spacing, the low band versus the high band coverage range would impact the ability of the TPG network to carry traffic. So that's why I made that conclusion. … [The] [s]pectrum holdings of … TPG does not lend itself to rolling out a macro network on typical site spacings and, again, that largely leads you to …likely why they chose to do a small cell network. 707 Mr Wright said that TPG's spectrum holdings are ill-suited to be rolled out on a conventional macro cell network. Its spectrum holdings are insufficient for that sort of deployment. Mr Wright explained this in his first report: A key additional detail to note for TPG is that their mid band spectrum holdings are all at 2600 MHz and 3.6 GHz which are located at the higher end of the mid frequency band compared to other MNOs who also hold 1800 MHz, 2100 MHz and 2300 MHz (Optus) spectrum. The shorter range of coverage of the 2600 MHz and 3.6 GHz bands relative to the other mid bands will limit how much traffic can be carried on sites that are spaced more widely for low band coverage. To effectively utilise this spectrum would require a macro network with more sites built closer together which in turn would make such a network more expensive to build than one built using a combination of lower spectrum bands. 708 It follows that Mr Wright saw no value in a MORAN between Vodafone and TPG because Vodafone would favour a conventional macro site deployment, whereas TPG's spectrum holdings would dictate an altogether different network design. 709 Mr Wright's evidence was that a MORAN between Vodafone and either Telstra or Optus was a possibility. He said he was never aware of any discussion of such a possibility within Telstra when he was there, and he said he did not know if a MORAN between Optus and Vodafone would be possible. 710 Mr Wright's evidence was that an MOCN between Vodafone and TPG was possible, but that such agreements required 'complex business investment and commercial contracts and procedures'. He said that such arrangements 'take commitment from both sides' and that such arrangements pose 'significant technical network integration issues and would be very costly' (as he wrote in a statement to the ACCC's Domestic Mobile Roaming Declaration Inquiry in 2016). He accepted that the only MOCN he had been involved in 'ended pretty badly'. That MOCN between Telstra and Hutchison/3 ('3' being a brand of Hutchison) was in respect of a 3G network, whereas any MOCN between Vodafone and TPG would be for 4G and 5G networks that included data traffic. Mr Wright accepted that this added a further level of commercial complication even beyond that dealt with by the unsuccessful MOCN between Telstra and Hutchison/3. 711 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 712 I should, for completeness, mention the Mobile JVA entered into between Vodafone and TPG on 30 August 2018. Whilst the Mobile JVA will continue in its terms, the evidence was that TPG was not likely to pursue discussions with Vodafone on topics such as spectrum sub-licensing, roaming or network sharing in the absence of the merger. I have accepted this as being the position.

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The submissions of the ACCC 713 The ACCC submitted that Vodafone's case on MergeCo was opened at a high level of generality, as was the evidence adduced by the merging parties. It was submitted that there was nothing in the evidence that would allow the Court to find that the retail mobile network of MergeCo and its offerings will be anything more than a continuation of Vodafone's mobile network and market behaviours. 714 The ACCC submitted that the evidence which is specific points away from the generalised assertions which Vodafone advances. In particular, the ACCC contended that what the evidence shows is that: (1) MergeCo does not have plans to spend any more capex on the mobile network than Vodafone is already spending, and in fact it appears expenditure is to be reduced; (2) MergeCo does not have plans to raise more capital by way of equity within the relevant timeframe; (3) the public commitment to deleverage, coupled with the public commitment to pay 'at least' 50% of NPAT as dividends, puts a practical limit on the likelihood that MergeCo will raise debt (and the extent of any debt that could be raised), particularly where it is a fundamental feature of the merger that the dividend stream be sufficient to service the US$3.5 billion debt taken off Vodafone's balance sheet by its shareholders; (4) even if it obtains debt finance, there is no evidence it would draw down on a facility to fund network expenditure (and it has incentives not to do so); (5) the public commitment to pay 'at least' 50% of NPAT as dividends limits the cash flow that MergeCo will have to fund investment (and, as noted above in (1), MergeCo does not intend to spend more capex on the mobile network than Vodafone is already spending); (6) MergeCo will spend less on capex as a proportion of EBITDA than Vodafone presently does, and will still lag far behind Telstra and Optus; (7) MergeCo does not have plans to undertake investment in the mobile network XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX; (8) MergeCo does not have plans to spend the capex necessary to make use of TPG's 2600 MHz spectrum; (9) no analysis has been done to identify the overlap between the location of TPG's small cells and Vodafone's congestion hot spots, only a limited number of TPG small cell sites are likely to be usable, and TPG's small cells cannot be used in a 5G network while they include equipment supplied by Huawei. Consequently, any benefit they offer MergeCo will only be short-term; (10) MergeCo does not have any plans to expand the mobile network footprint in regional areas and (on Mr Badrinath's evidence the regional market can only support two MNOs) will likely not do so, at least within the relevant timeframe, meaning that MergeCo will continue to have the same coverage limitations and dependence on Optus roaming which Vodafone claims hampers it at present; and (11) the opex synergies are high level estimates which may or may not be realised and which do not, in any event, create sufficient cash flow to make much of a difference to network investment in the relevant timeframe. 715 It was submitted that whilst it may be accepted that MergeCo having the combined spectrum holdings of the two entities (and, in particular, TPG's 2 x 10 MHz of 700 MHz) gives MergeCo more spectrum than Vodafone would have alone: (1) the mere possession of more spectrum does not, in and of itself, establish that MergeCo will behave differently and in a more competitive manner than would Vodafone, absent the merger, particularly where there is no evidence of plans to incur capex to actually deploy TPG's spectrum in areas requiring further capex (beyond the scope of the RAN Refresh program) on new radios and the like; and (2) MergeCo's behaviour in the market would not lead to a more competitive position than would exist if Vodafone maintained its current competitive position in the market and TPG entered as a fourth MNO. 716 The ACCC accepted that on paper, MergeCo has greater capacity to raise debt, but submitted that the evidence does not indicate any intention to exercise this capacity in the relevant timeframe so as to improve the state of competition in the retail mobile market. Rather, it indicates an intention to deleverage and reduce capex. Similarly, while it may be accepted that, as a point of principle, 'more spectrum is better', Vodafone has not advanced any evidence to establish that MergeCo will use the 700 MHz spectrum XXXX XXXX XX in the relevant timeframe. The evidence, it was submitted, is also that none of the 2600 MHz, 1800 MHz or 3.6 GHz spectrum holdings will be of particular use to MergeCo given its commercial and geographic focus. 717 The ACCC submitted that the key document setting out MergeCo's financial position and capex plans is the 'Merger Financial Summary', which Mr Badrinath described as 'the business plan'. The ACCC submitted that the Court should proceed on the basis that the Merger Financial Summary evidences the present intention of the merger parties for MergeCo's business in the period to 2023. 718 It is appropriate to set out in more detail the submissions of the ACCC, which are as follows. 719 The ACCC contended that if the merger proceeds, MergeCo will have the same mobile network and mobile customer base that Vodafone presently has, with the addition of only, at most, XXXXXXX TPG mobile customers that currently use the Optus, rather than Vodafone network (XXXXXX XXX XXXX XXXXX). The merger will not create 'scale' in MergeCo's mobile customer base - MergeCo will have to build 'scale' and its plan to do so depends on successfully cross-selling in circumstances where, as set out below, both Vodafone and TPG have failed to successfully cross-sell despite offering consumers bundled offerings. The merger would not reduce the challenges of building scale. MergeCo will need to attempt to build scale, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 720 While having access to TPG's fibre backhaul network has been identified as a benefit of the merger, the financial benefit is limited to the extent that removing a cost line from Vodafone (ie paying TPG for access to the backhaul) also removes a revenue line from TPG (ie revenue received from Vodafone for access to the fibre network). The ACCC submitted that this was a mere transfer. 721 While MergeCo will have access to TPG's spectrum holdings, the ACCC submitted that the evidence does not support a conclusion that access to that spectrum will lead to any material increase in competition in the retail mobile market by comparison to Vodafone and TPG on a standalone basis in the future without the merger. 722 As to spectrum, in Mr Sixt's view, 'the benefit of the joint entity having more spectrum than either of the entities on a standalone basis … speaks for itself. If you have more spectrum, it is almost axiomatic that you need to invest less in building sites'. Mr Sixt accepted, however, that this was a 'first principles' view. 723 The ACCC submitted that the evidence shows that in order to enjoy the full benefit of Vodafone's and TPG's combined spectrum holdings, MergeCo would need to make a significant capex investment XXXX XXXXX XXXXX XXXX XXXX XXXXX XXXX. MergeCo will carry out the RAN Refresh program: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 724 As to the 700 MHz spectrum band: All but XXX of Vodafone's macro sites do not have the antennae necessary to broadcast 700 MHz spectrum. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. It may be accepted, then, that both Vodafone and MergeCo will be able to use the 700 MHz band XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX Vodafone has not, on Mr Sixt's evidence, modelled what it would need to spend to make use of TPG's 700 MHz holdings. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. XXXX XXXX, MergeCo will have access to 15 MHz of 700 MHz spectrum (TPG's and Vodafone's combined holdings). But there is no clear evidence that having access to that spectrum would lead to a different congestion profile to that which would result from standalone Vodafone's use of the 5 MHz of 700 MHz spectrum (which it would be able to use following the RAN Refresh); or that any better congestion profile would lead to materially different competitive behaviour in the retail mobile market by MergeCo as compared with that which would be expected of Vodafone, absent the merger. Mr Berroeta, in his affidavit, contends that the increase in MergeCo's network capacity from the combination of spectrum holdings would be around XXX times in the 700 MHz band (and not 3 times, which might otherwise be thought to be the increase from Vodafone's 5 x 700 MHz to a combined 15 x of 700 MHz). However, it is not clear that this necessarily is of great significance in relation to Vodafone's immediate congestion position as traffic growth is highest in the higher bands. Low-band traffic growth, such as would use the 700 MHz spectrum, has a CAGR of XXX. 725 As to the 2600 MHz spectrum: The immediate utility of the 2600 MHz spectrum for MergeCo is limited, as Vodafone does not hold any 2600 MHz spectrum and MergeCo would only be able to use that spectrum if it installed new radios capable of broadcasting it. Vodafone does not consider it cost efficient to upgrade sites to use the 2600 MHz holding, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 726 As to the 1800 MHz and 3.6 GHz spectrum: TPG's holdings of 1800 MHz spectrum would assist MergeCo in certain regional areas and can be deployed immediately, and TPG and Vodafone have overlapping holdings in certain other regional areas and small cities. MergeCo would not, though, be assisted by this spectrum in the main metropolitan areas (such as Sydney, Melbourne and Brisbane), XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. In Mr Wright's view, gaining access to the holdings of 3.6 GHz spectrum acquired by the Mobile JV would improve the business case for MergeCo to deploy 3.6 GHz AAU on macro sites. But absent such deployment, that spectrum could not be used by MergeCo. And the utility of that spectrum is in any case limited until the penetration of 5G devices increases. 727 It was submitted by the ACCC that only the 1800 MHz spectrum, then, could be deployed by MergeCo immediately, as Mr Lopez accepted. 728 The ACCC then submitted that in his expert report, Dr Padilla stated his view that 'MergeCo would be able to better utilise the parties' existing spectrum holdings across their network sites in a way that generates more capacity than the sum of the parties' individual capacities'. 729 However, it was submitted that: Dr Padilla's analysis was not to the point. He compared the future use of the spectrum by MergeCo with the current use of spectrum by Vodafone and TPG. This analysis does not compare the future with and without the merger. In particular, it does not consider the use of spectrum by TPG in the future where it rolls out a mobile network; XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 730 Further, the ACCC submitted that Vodafone's contentions about its need for more capacity to deal with congestion are based on its inflated congestion analysis. If Vodafone's projections of CAGR are accepted, it follows that any benefits of the combined spectrum for network performance would be short-lived. If Vodafone is right, the continued growth of data use will mean that, while MergeCo's spectrum capacity may provide capacity relief in the short-to-medium term, its spectrum would quickly be utilised, leaving it still needing to address the difficulties Vodafone claims it currently faces. 731 As to TPG's small cell sites, the ACCC submitted that the evidence does not demonstrate the extent to which: those small cell sites might be of practical utility to MergeCo; MergeCo would incur costs to complete small cell sites (as necessary, given many are not completed); congestion might be assisted by using those small cells; or by using the small cells, MergeCo's competitive offering might be superior to that of Vodafone, absent the merger. 732 As to the integration of TPG's small cell network with Vodafone's network, Mr Berroeta accepted that Vodafone is uncertain of the extent to which TPG's small cell network might be of use to MergeCo. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XX XXXX XXXXXX XXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXX. 733 It was submitted that there is no evidence that Vodafone has done any modelling to assess where TPG's small cells might be incorporated into Vodafone's network. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 734 There is, the ACCC submitted, no basis to support a finding that TPG's small cells will provide a benefit (or any material benefit) to MergeCo leading to an increase in competition in the retail mobile market. Vodafone contended that the evidence makes clear that Vodafone will deploy TPG's small cells, immediately. The ACCC submitted that even if there was a basis for such a finding, any benefit would be short-lived, because the small cells are Huawei equipment and therefore cannot be expected to be used alongside another vendor's equipment and cannot form part of a 5G network. Similarly, Mr Sivagnanam's suggestion that the TPG small cell sites could be used to maintain continuity of coverage during macro site upgrades as part of the RAN Refresh would be only a limited, short-term benefit. 735 As to the regional network, the ACCC pointed out that Vodafone does not plead that MergeCo will expand its regional network, which is presently limited. Its plea is limited to alleging that it will have the spectrum required to 'offer improved services to customers in significant regional areas'. That appears to be a reference to the major regional centres where Vodafone already has a regional network, and not to regional areas where Vodafone currently relies on roaming on the Optus network. Accordingly, there is no basis in the pleadings for the Court to consider the extension of a regional network as likely to lead to an increase in competition. In any event, even if that matter were to be considered, the evidence does not support a finding that MergeCo would be likely to extend its regional network. 736 In the ACCC's submission, the Court should find that MergeCo will not expand its regional network in the relevant timeframe. Mr Berroeta suggested that MergeCo would be able to 'explore more presence in the regional market' and that it would have 'a higher chance to consider any investment in regional Australia'. But his evidence was that Vodafone does not see regional Australia as an attractive market, partly because it has a small and declining addressable market of only about six million people, and partly because Vodafone's presence there is limited, 'so we concentrate where we have more presence'. In the future with the merger, these factors remain just as unattractive for MergeCo. 737 The ACCC observed that Mr Badrinath gave evidence that the view he expressed in his affidavit that '[i]n large parts of Australia, it is only economic for one or two operators to roll-out network infrastructure, as the population size does not support a higher number of operators', would 'to a large extent' remain the same in the future with the merger. Indeed, Mr Berroeta accepted that a possible regional roll-out was not contemplated, let alone costed, in business plans for MergeCo - XXXX XXXX XXXXX XXXXX XXXXX - and that rolling out a regional network would be a significant investment. 738 Vodafone contended that the merger would alleviate Vodafone's funding difficulties, 'open[ing] opportunities for better access to external funding' and giving it 'the ability and incentive to obtain sufficient funding to undertake the investment that is necessary to maintain an efficient network'. The ACCC contended there was no evidence of any plans to undertake investment beyond that which will be undertaken by Vodafone absent the merger. In fact, capex is to be reduced when compared with the capex that Vodafone will spend on its network, absent the merger; XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX. 739 In response, Vodafone contended that the illustrative financials, being the Merger Financial Summary, was prepared on the basis that it was assumed MergeCo's capex spend would be quantified as the sum of the roll forward capex of TPG and VHA as standalone entities. It was contended by the ACCC that it follows from that that the illustrative financials show capex that substantially exceeds VHA's approximate standalone capex envelope of $500 million per year. 740 Mr Berroeta also explained in cross-examination that the capex numbers in the illustrative financials are not a capex plan for MergeCo. It was submitted that all that was done was that the two companies' individual standalone capex plans were added together: Now, you see the lines for VHA capex and TPG capex?---Yes. Do you agree that these lines just roll forward the two merging parties' capex expectations?---Yes. In the absence of a joint plan - the projection is a roll forward of the anticipated capex. 741 Further, the ACCC contended that: there is no plan for MergeCo to raise equity; MergeCo will maintain dividend payments at the level necessary to service the debt which is being taken off MergeCo's balance sheet (and which is guaranteed by Vodafone Group and CKHH); as MergeCo deleverages and so reduces its interest expenses, MergeCo's NPAT (and hence its ability to pay dividends at the level necessary to service the debt taken off its balance sheet) is supported by the benefit of using Vodafone's accumulated tax losses; from 2022, when MergeCo is projected to start paying tax, the dividend payments will be sufficient to service the debt only if - as is the stated intention - MergeCo deleverages, so as to bring down the interest payable; and in these circumstances, there is a practical ceiling on MergeCo's ability to take on extra debt in the relevant timeframe. 742 The ACCC noted that Vodafone owes debts to banks under a US$3.5 billion syndicated loan facility and an A$1.7 billion loan facility. Those debts are guaranteed by Vodafone Group and CKHH on a 50/50 basis. A crucial part of the merger is that the US$3.5 billion loan will be taken off the balance sheet of MergeCo and novated to a joint venture company, formed, owned and controlled 50:50 by Vodafone Group and CKHH. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. This is part of a debt restructure which Mr Sixt explains is 'necessary to deliver the agreed shareholding split' and ensure a near even 'split of ownership and control of MergeCo'. 743 The ACCC submitted that it is vital to both Vodafone Group and CKHH that the dividend stream from MergeCo is sufficient to cover the US$3.5 billion loan: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. Thus the Scheme Implementation Deed provides that MergeCo 'shall adopt a dividend policy of paying a dividend of at least 50% of net profit after tax' until the Board determines otherwise. 744 The ACCC noted that the ASX release announcing the merger notes this initial dividend payout ratio and, by stating both the initial and target net debt to EBITDA ratios, indicates an intention to deleverage: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 745 In circumstances where MergeCo will be majority owned by the Vodafone shareholders, and where the Vodafone shareholders will nominate four of ten Board seats, with Mr Berroeta also being a director, and where a public commitment to deleveraging and minimum dividend streams has been announced, the ACCC submitted that the Court should be satisfied that MergeCo will not reduce the level of dividends. If anything, based on Mr Badrinath's evidence, the level of dividends will be increased. 746 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: 747 The above summary sets out the deleveraging profile of MergeCo. That profile is consistent with the public commitment to deleveraging made in the context of the announcement of the merger. The ACCC pointed out that deleveraging was the stated intention when the merger was announced and that XXXX XXXX XXXX XXXXX XXX XXXX XXXX. Mr Sixt's evidence was that, absent reinvestment opportunities, he expects MergeCo to deleverage and pay down its debt. 748 The ACCC also noted that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 749 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX. 750 The ACCC contended that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 751 It was submitted that although Vodafone (as the legal entity that would ultimately become MergeCo) entered into a facility of $4.75 billion in December 2018 XXXX XXXX XXXX XXXX:: the bulk of that facility was a refinancing of the debt MergeCo would carry in any event. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX; although it can be accepted that MergeCo is likely to be able to obtain debt finance if it wants to, there is no evidence that it would actually draw down on a facility to fund network expenditure XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX; and in fact, given the need to maintain high dividend payments and MergeCo's intention and public commitment to deleverage, there are incentives for MergeCo not to take on more debt. 752 Additionally, it was contended by the ACCC that it is unlikely that MergeCo will raise equity within the first five years after the merger: Mr Sixt is not aware of any proposal for MergeCo to engage in capital raising within this period. 753 The ACCC noted that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: (a) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX (b) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX; XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX; XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 754 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 755 However, it was submitted by the ACCC XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 756 It was submitted that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 757 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 758 The ACCC also submitted that the opex synergies are high level estimates which may or may not be realised and which do not, in any event, create sufficient cash flow to make much of a difference to network investment in the relevant timeframe. 759 The ACCC submitted that the evidence does not demonstrate that MergeCo would operate a network that would have substantially greater capacity to win market share from Telstra or Optus or offer a competitive constraint substantially greater than that offered by Vodafone and TPG in the future without the merger. Indeed, MergeCo is likely to develop its network in a similar way to standalone Vodafone. Vodafone and TPG have not adduced any evidence that MergeCo will have either the capacity or strategic willingness to make investments in mobile at the level of Telstra or sufficient to compete head-to-head with Telstra or Optus. 760 MergeCo's geographic and population coverage would not be substantially different to that of a standalone Vodafone; like Vodafone, its network will lack regional coverage. 761 The ACCC contended that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. Mr Sixt accepted that the merger would not have any practical or financial impact on the steps MergeCo would need to take to roll-out new equipment: 'it will still cost the same, irrespective of the merger'. The ACCC noted that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 762 The ACCC contended that the most likely scenario is that MergeCo will adopt a similar competitive approach to that which Vodafone adopts currently, with an offering in the retail mobile market which is not very different from Vodafone's current offering. In other words, MergeCo's mobile business will be Vodafone's mobile business, with the addition of spectrum from TPG which it will only get the full benefit of by investing in capex. 763 MergeCo would be likely to compete in the same metropolitan areas in which Vodafone currently competes, and in the same areas of the market as Vodafone does now, seeking to protect revenue from Vodafone's existing customer base while minimising capital expenditure. Moreover, as Mr Smith stated, given that TPG's and Vodafone's customer bases would likely overlap significantly in the future without the merger, MergeCo would have less of an incentive to introduce aggressively priced plans and offers (as compared to TPG, as a new entrant, and Vodafone, responding to competition from TPG, in the future without the merger), as this would be likely to cannibalise a significant proportion of Vodafone's subscribers. 764 The ACCC contended that the merger will not increase scale in the retail mobile market. 765 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 766 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 767 Ultimately, the ACCC submitted that the evidence does not support the conclusion that MergeCo will have more success cross-selling than Vodafone and TPG standalone in the future without the merger. In his expert report, Mr Smith observed that it is unclear how cross-selling and bundling by MergeCo would benefit competition, and notes that there is a lack of evidence about the importance of bundling to consumers. 768 Turning to the larger corporate and government customers, Vodafone contended that MergeCo 'will be particularly well-placed to challenge in the least competitive segment of the retail mobile market, which is supply to government and large commercial enterprises'. However, it was contended by the ACCC that there was little evidence about: (1) the process of integration that would be necessary; (2) the size of the supposed opportunity that would be available to MergeCo; (3) the likelihood of MergeCo actually succeeding in a segment where Optus is a 'distant second' to Telstra, despite it having a regional network, fully converged services, and the ability to offer a sophistication of product and services which, in the opinion of Mr Berroeta, large customers want. 769 Further, it was submitted that to the extent Vodafone's ability to compete in winning business from mid to large corporate customers and government is said by Vodafone (drawing on Mr Berroeta's speculation) to relate to Vodafone's reputation and lack of regional coverage, those two matters will remain unchanged in the merger scenario. Dr Padilla's evidence in conclave was that three things are needed to compete for government and corporate business: bundling, quality and coverage. It was submitted that the merger will only help with one of those: the ability to offer bundled services. It will not assist with the other two. For this reason as well, Dr Padilla's opinion that MergeCo will be a stronger competitor in the government and larger corporate sector should not be accepted. So far as reputation is concerned, it was submitted that it cannot be supposed that large customers are so naïve that any reputational issues associated with the Vodafone network can be overcome simply by offering the mobile services under another brand name forming part of the MergeCo stable. 770 The ACCC contended that at most, the evidence demonstrated that MergeCo might have a greater capacity to offer sophisticated bundled products to those large corporations and governments to whom whole of business solutions and sophisticated fixed services are essential. Even then, though, Mr Davies' evidence was that in the last six or seven years there has been a trend away from bundling in the enterprise sector, and a 'propensity to, perhaps, consume mobility from a different provider to the data network'. Further, the ability of Optus to provide sophisticated bundled products does not appear to have enabled it to more effectively compete for large corporations, meaning that the Court should not conclude MergeCo would succeed where Optus has failed. 771 The ACCC submitted that, ultimately, the competitive constraint of MergeCo on the retail mobile market is not likely to be greater, or materially greater, than that provided by Vodafone and TPG absent the merger. In this regard, as Mr Smith explained, the ACCC submitted that the merger parties have failed to demonstrate that any of the claimed efficiencies or benefits of the merger will likely have the effect of increasing competition in the retail mobile market, particularly by comparison to the state of competition in the future without the merger. 772 The ACCC pointed to the evidence of Mr Smith, which addressed each of the claimed efficiencies in his report. Mr Smith's evidence was that many of these benefits are not merger-specific, and that to the extent these benefits are substantial, Vodafone and TPG will have strong incentives to achieve them in the absence of the merger (through network sharing for example). Mr Smith considered that 'the benefits from network sharing can be substantial outside the scope of a merger', and noted that such network sharing arrangements have been used both in Australia and extensively outside Australia. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX.

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The submissions of the merger parties 773 The answer to the ACCC's submissions by the merger parties at a general level was as follows, which submissions of the merger parties I have accepted. 774 The merger will promote competition in the retail mobile market. It will bring together the complementary businesses and assets of Vodafone and TPG to create an ASX-listed investment-grade fixed and mobile telecommunications company. MergeCo will benefit from significant enhancements in its network capacity and quality. It will be able to deliver a superior product offering to all customer segments. 775 It was submitted that MergeCo's improved financial position will enable it to invest more heavily in its network infrastructure, assisting to alleviate the congestion issues that Vodafone currently faces. MergeCo will also be able to deploy a 5G network faster than Vodafone would be capable of doing on a standalone basis. As a result, MergeCo will be able to meet the demands of customers as the next technological generation change takes place, and will position it to be a far more effective competitor to Telstra and Optus. 776 Then it was submitted that MergeCo will have improved assets and capabilities that are important to win contracts from enterprise and government customers. Vodafone has sought to compete in that segment for a number of years with limited success. The ability to more effectively bundle fixed and mobile products (to create 'whole of business' solutions), combined with access to TPG's fibre assets, will allow MergeCo to deliver a superior product to enterprise and government customers that is capable of challenging Telstra's dominance in this segment. 777 The increasing desire of customers across all segments for bundled solutions will also generate an opportunity for MergeCo to increase its customer base through cross-selling mobile products to MergeCo's fixed customers, and vice versa, which in turn will drive the ability for MergeCo to attain the scale required to operate as a competitive force.

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Consideration of competing positions 778 I turn now to consider the competing submissions of the parties. It is convenient to start with a view of the anticipated competitive effects of the merger from a competitor. While not decisive, the formulated and timely views of a competitor properly understood in the context they were made are significant in the Court's understanding of the competition framework in a market. 779 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX . 780 In my view, this summary properly describes the potential competitiveness of MergeCo. 781 Of course, it does not need to be shown that MergeCo will enhance competition: the question is whether the merger would have the effect, or be likely to have the effect, of substantially lessening competition in the retail mobile market. 782 I turn to various aspects of the significant arguments put by the parties. 783 I make some preliminary findings on two important contentions of the ACCC before dealing with other specific topics. 784 First, as to the policy of paying a dividend of at least XXX of net profit after tax, the ACCC put to a number of Vodafone's witnesses that MergeCo would use its net profit after tax to pay dividends to its shareholders or to pay down debt. The ACCC contended that MergeCo would not use its financial firepower to invest in its network or compete for market share. I do not accept this contention. 785 Mr Sixt explained the benefits to a public company of a healthy dividend stream: [I]t's also in the interests of the new TPG … to have a solid dividend policy. That is what shareholders in public companies expect and it's one of the things that they look to. So there was really no inconsistency between the objective of achieving dividend flows that would at least cover the interest and perhaps repay some of the debt and supporting the … value proposition of … MergeCo's shares … as public company shares. 786 It will ultimately be a matter for the Board of MergeCo to determine how to apply its free cash flow. Mr Berroeta gave unchallenged evidence as to the steps that he, as the future CEO, would consider, and with an improved balance sheet the options available to MergeCo include: (1) expediting the roll-out of 5G; (2) incurring additional capex to address Vodafone's current and projected congestion issues; (3) enhancing the regional presence of MergeCo; and (4) competing on price to increase market share. 787 The availability of net profit after tax to pay dividends or pay down debt simply illustrates that MergeCo is generating sufficient funds to take such steps. There is no evidence that MergeCo would not use its improved financial position to compete more effectively in the retail mobile market. 788 The modelling conducted at the time of the merger negotiations assumed a 50% dividend payout ratio by MergeCo to its shareholders. That payout ratio is considerably lower than the dividend payout ratios adopted by Telstra and Optus: (1) Telstra's dividend policy is to pay a fully franked dividend of between 70% to 90% of underlying earnings. (2) Singtel (Optus' listed parent company) had an ordinary dividend payout for the financial year ended 31 March 2019 which was 101% of the Group's underlying net profit and 88% of the Group's free cash flow. 789 In the Australian market, some investors place great weight on dividends and some companies attract investors by paying attractive dividends. Accordingly, being able to pay an attractive dividend will be important for MergeCo's ability to attract equity capital. 790 Secondly, Vodafone highlighted the XXX XXXX five year revolving facility that will be available to be drawn for MergeCo's future funding needs and submitted that the ACCC had not otherwise demonstrated that MergeCo would have a need to raise capital by way of equity in order to be competitive. Mr Sixt's evidence was that equity would only be required in circumstances where there had been a 'catastrophic failure'. While Vodafone faces serious obstacles because it is capex constrained, it does not follow that MergeCo will be as dependent on raising further capital as Vodafone. That is because the merger affords considerable benefits at relatively small incremental cost. For example, Mr Sivagnanam gave evidence that adding radios to Vodafone's sites to accommodate TPG's spectrum adds only a small incremental cost, so the spectrum gain from the merger can be leveraged without substantially more capital than is required for the RAN Refresh. 791 These matters are important, because they demonstrate the future financial capabilities of MergeCo to carry out improvements to the network. I now turn to specific issues.

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Network capacity and quality 792 I have accepted that Vodafone and TPG have lower spectrum holdings relative to Telstra and Optus. This means they each have less ability to offer products with large data inclusions and high data speeds to the marketplace. In Vodafone's case, it is also suffering from congestion issues, the extent to which has been contested by the ACCC. 793 The acquisition combines the spectrum holdings of Vodafone and TPG in the one company, which could be deployed to increase network capacity. This would relieve congestion on Vodafone's existing network and improve the overall customer experience, and would enable MergeCo to make aggressive data offers in the marketplace that are attractive to many customers. The spectrum held by TPG and Vodafone is in some respects complementary and this would be a benefit of the merger. 794 In this regard, Mr Sixt gave evidence (which I accept) that the benefit of having more spectrum speaks for itself (even if at first principles level), because it 'maximises the optionality that you have in terms of how you achieve coverage, density and capacity necessary to serve your customers'. Likewise, Mr Teoh's evidence was that MergeCo's complementary spectrum holdings would make it a more effective competitor. 795 In my view, the evidence establishes, as contended by TPG, that MergeCo could combine its spectrum to realise these benefits in five ways. 796 First, because TPG's 2 x 10 MHz and Vodafone's 2 x 5 MHz of 700 MHz spectrum are in adjacent bands, this spectrum can be deployed as a consolidated band which reduces the amount of bandwidth that otherwise would be consumed for 'overhead' control functions if the bands were deployed separately. To make use of the combined 700 MHz spectrum on Vodafone's macro sites, it would be necessary to install 700 MHz radio equipment, because as of June 2019, only XXXXX Vodafone base stations had 700 MHz radio equipment installed. However, if the acquisition proceeds, there would at least be a stronger business case for deploying 700 MHz radio equipment as part of Vodafone's RAN Refresh program, because it would provide significant capacity relief. 797 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXX. Vodafone understands the benefit of deploying TPG's 10 MHz of 700 MHz spectrum as part of a combined lot of 15 MHz. I do not see this benefit as being discounted in the future by Vodafone. 798 Secondly, MergeCo could obtain a benefit in regional areas from TPG's 1800 MHz spectrum at reasonably low incremental cost because Vodafone and TPG have complementary 1800 MHz spectrum holdings in those areas. This would not only assist in regional areas. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX. 799 Thirdly, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX. Further, it could consider including this spectrum band into Vodafone's RAN Refresh program to utilise it more fully. 800 Fourthly, MergeCo would combine Vodafone's 30 MHz of 3.6 GHz spectrum with TPG's 30MHz in order to deliver 5G services. The combined 60 MHz held by MergeCo would be more comparable to the 5G spectrum holdings of Telstra and Optus. This would both relieve congestion on Vodafone's network and enable MergeCo to better compete with Telstra and Optus on 5G services. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XX. 801 Then there is the debate between the parties on the congestion faced by Vodafone. Whatever is the state of the congestion issues now, I accept that Vodafone will face congestion issues that will cause its network quality to deteriorate unless steps are taken to address those issues in the near future. 802 Vodafone's congestion issues have arisen primarily because the demand for mobile data has grown exponentially in recent years. Data growth on Vodafone's network was XXX in 2018 and XXX in the 12 months from June 2018 to June 2019. 803 In the light of that data growth, Vodafone has modelled its RAN Refresh network planning based on a CAGR of XXX (with a CAGR of XXX being a lower case scenario). The relevant Vodafone personnel, who are experts in analysing network demand, consider that this is the appropriate forecast growth rate for the purposes of driving Vodafone's business decisions. Mr Berroeta, who initially considered that the data growth rate may taper off, has since come to the view that a XXX data CAGR is appropriate in the light of Vodafone's actual network experience. I accept this evidence. 804 It was suggested by the ACCC to Mr Sivagnanam that the data CAGR adopted by Vodafone in its network planning calculations was too high and Vodafone should instead have used a CAGR of around XXX. I have accepted the data growth rate that Vodafone uses in the ordinary course of its business for the purposes of network planning (and which is based on actual customer demand). I should interpolate that I understood that there is a significance of a change in the CAGR: for instance, a difference of XXX between XXX and XXX would halve Vodafone's modelled congestion. However, this is all a matter of business judgement, using appropriate tools and assumptions to determine future action. 805 There was considerable debate about the Nokia Wireless Traffic Report ('Nokia Report') and Vodafone's CAGR figures and the RAN Refresh modelling. Whilst I do not consider it is a material matter in the overall context of the issue of congestion, it seems to me that based on a 10 year period, the CAGR represented by the Nokia Report was between 33% and 47%. 806 As to Vodafone's CAGR figures, whilst the lower and upper may be in dispute, the real issue is whether these figures are in any event appropriate to use in projecting future congestion on Vodafone's network. 807 I am satisfied based upon the evidence of Mr Sivagnanam and Mr Lopez that their projection of growth in the future, whilst not a perfect prediction, is not unreliable or extreme. In any event, changes in the CAGR would not affect the problem Vodafone faces. 808 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 809 Vodafone has formed its data volume growth projections in the ordinary course of its business. It was planning to make substantial investments based on those projections as part of the RAN Refresh. In my view, it should be accepted that the forecasts prepared by Vodafone represent a bona fide, reasonable and realistic projections of how data volume and congestion will grow on its network in the future. 810 The congestion levels to be expected by Vodafone were illustrated by the modelling exercise undertaken by Mr Lopez over the course of May to July 2019. Despite the submissions of the ACCC, I see no reason not to accept this analysis as a bona fide attempt to predict the future. 811 Mr Lopez's analysis showed that: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX; XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX. 812 Mr Wright also assessed the current and future degree of congestion on Vodafone's mobile network. His evidence was that Vodafone's network is likely to become increasingly congested, and that Vodafone would need to take steps to increase its network capacity. In his first report, Mr Wright concluded that: In the absence of a managed approach to demand growth such [as] using customer plan limits and rate limiting combined with the corresponding availability of network investment and spectrum, the VHA network may reach increasing levels of network congestion requiring additional cell densification and/or acquisition of additional spectrum. 813 Mr Wright described the pressure that increased data growth places on capacity constrained MNOs such as Vodafone as follows: [I]f you have limited network capacity, you want to manage the rate at which data growth is occurring because it isn't an unlimited resource. Even Mr Björnson refers to Cooper's law which, I think, doubles every two and a half years which is, you know, far less than those types of numbers I saw that Vodafone were growing at, but then you also have this continual process with networks where you invest in additional sites to grow more capacity because demand does go up and it's not going to stop. So you're looking at next generation technologies, modernisation of technology, acquisition of more spectrum, building more densification in the network and when these are in balance, the business continues smoothly. 814 Mr Wright accepted that consumer demand for data is rapidly increasing, and this required a cycle of investment in technology, sites and spectrum. 815 There seems no dispute that if Vodafone's congestion levels worsen, the impact on network quality is expected to be to some degree worse. 816 It was submitted by Vodafone that the merger will assist in addressing Vodafone's network congestion issues in the following ways: Vodafone and TPG will be able to combine their spectrum assets. Vodafone will be able to integrate a significant number of TPG's small cells into its mobile network. MergeCo's improved financial position will enable it to fund future spectrum purchases and carry out a RAN upgrade more quickly and comprehensively than Vodafone on a standalone basis. 817 I accept these submissions. Vodafone and TPG combined hold 2 x 15MHz of 700 MHz spectrum XXXX XXXX XXXX XXX. 700 MHz spectrum is highly sought after due to its superior propagation qualities: it can travel further than higher bands of spectrum and is more effective in penetrating buildings. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXX XXX XXX XXX XXXX XXXX XXXX XXXXX XX. 818 TPG holds up to 2 x 10 MHz of 1800 MHz spectrum in Adelaide, Canberra, Darwin, Tasmania and a number of other significant regional areas. MergeCo would be able to deploy TPG's 1800 MHz spectrum holdings, providing an immediate capacity boost to Vodafone's network in regional areas including Tasmania, Darwin, Canberra, Adelaide and the Gold Coast. 819 MergeCo will have access to the entirety of the 60 MHz of 3.6 GHz spectrum (which is suitable for 5G) held by Mobile JV. Access to a sufficient quantity of this spectrum is essential to rolling out and maintaining a competitive 5G network. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX. As Mr Sivagnanam explained, XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 820 In addition, TPG has around XXX small cells which are in varying states of readiness for deployment in a mobile network. Vodafone intends to incorporate those small cells into its network, providing an uplift to Vodafone's network capacity in high density areas. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX. 821 The improved financial position of MergeCo will enable it to carry out a RAN upgrade across a greater number of sites and at a faster rate. Again, the extent of such enablement may be an issue, but there is an increased capacity and incentive to so act by MergeCo. Upgrading a higher number of sites per year will allow MergeCo to deploy its 700 MHz and 3.6 GHz spectrum more quickly and thereby relieve congestion. The deployment of that spectrum will also reduce the need to address Vodafone's immediate capacity limitations by building further sites, which will release additional capex for the 5G roll-out. 822 Mr Sivagnanam explained the position as follows, which evidence I accept: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX. XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX. 823 Therefore, in my view without a merger there would be challenges in congestion issues, which the merger will assist in the management thereof. 824 I accept that MergeCo will need to take further steps and invest additional funds after the merger is completed. This has not been detailed in evidence but I would not expect this to occur at this stage of the merger process. However, I find that there will be some financial improvements that follow from the merger, so that it will be able to upgrade sites to 5G faster and fund additional spectrum purchases as and when the government makes spectrum available in the future. 825 Then there is TPG's fibre infrastructure. Having access to such infrastructure will enable MergeCo to deliver a superior product to customers that will enhance its ability to compete with Telstra and Optus. Mr Berroeta gave evidence to that effect during his cross-examination in the following exchange: And do you believe that if the merger proceeds MergeCo … would have an offering with the same features as can be offered by Telstra and Optus?---The merged company has features that not even Optus or Telstra has, because of the products that TPG had. 826 Mr Berroeta described the importance of fibre assets in delivering a competitive mobile network in the following terms: It is an unsatisfactory strategic position for an MNO not to have its own fibre infrastructure, which is necessary to connect its mobile sites to its data centres. Fibre infrastructure will be especially important in the future, having regard to the increase in new sites, increasing demand for data, including anticipated high levels of consumption by 5G applications, and the need for fast speeds. Fibre has the ability to transmit almost unlimited amounts of data. VHA presently accesses TPG's fibre network at significant cost. 827 Access to TPG's fibre infrastructure will also allow MergeCo to offer a higher quality fixed broadband service to all customer segments. It will be particularly important in enabling MergeCo to offer differentiated fixed and mobile bundles in the enterprise and government segment that go beyond simply re-packaging NBN fixed broadband products with mobile services. 828 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXX.

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Improved balance sheet 829 MergeCo would have a stronger balance sheet than either TPG or Vodafone separately. This would provide MergeCo with the capacity to invest strongly in its mobile assets, including by raising equity capital if necessary, and to roll-out 5G services and reduce network congestion more quickly. 830 At present, Vodafone currently has borrowings of US$3.5 billion and A$1.7 billion, which are approximately seven times its EBITDA. It has only been able to maintain these debt levels because its shareholders have provided guarantees in favour of Vodafone's lenders. Further, although it has a working capital facility from its shareholders of $1.5 billion, and has used $320 million for short term financing, it can only draw on that facility for approved expenditures in circumstances where the shareholders have said that Vodafone needs to be self-funding. 831 Likewise, TPG has limited debt and equity fundraising capacity for new investment in mobile network infrastructure. 832 If the acquisition proceeds, Vodafone's debt could be restructured so that Vodafone's debt is reduced to A$1.7 billion, with the remainder of its debt hived off to a separate joint venture between Vodafone's shareholders. The result could be a merged firm with revenue of approximately $6 billion, EBITDA of approximately $1.8 billion, net debt of approximately $4 billion (and a leverage ratio of 2.2x), an investment grade credit profile, the ability to establish a new debt facility well in excess of the initial $4.5 billion, and strong free cash flow. 833 Mr Berroeta said that MergeCo would be able to obtain external financing if it chose to do so, including via new debt facilities, issuing bonds or an equity capital raising. 834 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 835 In my view MergeCo will be in a stronger financial position than Vodafone on a standalone basis: this will enhance its ability to fund the network investment required to remain competitive. Mr Sixt gave evidence that: [O]ne of the objectives of the merger which was to create … a new public company, a new TPG … that would start its life with an investment grade balance sheet and, actually, with a very strong investment grade balance sheet, would start its life with a debt to EBITDA ratio, for example, of somewhere around two times, which is very healthy, which should qualify it for an investment grade rating which would basically mean that it would have very good access to capital and be perceived as being financially strong relative to its peers. 836 As Vodafone submitted, I accept that the objective is achieved in three ways: improved ability to access debt/equity funding; cost synergies arising out of the merger; and financial benefits from economies of scale.

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Financial benefits from economies of scale 844 MergeCo will benefit financially from achieving scale. Scale is important for MNOs, as it enables the fixed costs of providing coverage to be recovered across a larger number of customers. Mr Berroeta described the importance of scale for an MNO: Due to the high fixed cost expenditures involved in establishing and maintaining a mobile network, scale is a very important factor in determining whether an MNO will be an effective competitor. … All other things being equal, the larger the scale of an MNO, the lower its per-unit costs and the more efficiently it will be able to operate. … As VHA primarily focuses on being competitive to Telstra and Optus in metropolitan areas, it needs to obtain spectrum holdings similar to Telstra and Optus to service those customers, even though VHA has fewer customers overall. In Australia, the cost of spectrum generally is unaffected by the size of an MNO's customer base … and is more expensive in metropolitan areas than in regional areas. This means that, in order to be successful, an MNO requires scale. 845 XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX 846 MergeCo would be able to build a larger customer base due to increased capacity and cross-selling opportunities. 847 During his cross-examination, Mr Berroeta described how the merger would allow MergeCo to attain scale as follows: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX. 848 I cannot see any reason to doubt that MergeCo will be in a stronger financial position than Vodafone and TPG operating alone. 849 Further, I do not consider that MergeCo would use its net profit after tax to pay dividends to its shareholders or to pay down debt, at the expense of using its financial firepower to invest in its network or compete for market share. 850 It must be accepted that it will be a matter for the Board of MergeCo to determine how to apply its free cash flow. Mr Berroeta gave evidence (which I accept) as to the steps that he, as the future CEO, would consider and the options available to MergeCo which would include: expediting the roll-out of 5G; incurring additional capex to address Vodafone's current and projected congestion issues; enhancing the regional presence of MergeCo; and competing on price to increase market share. 851 There is no evidence that MergeCo would not use its improved financial position to compete more effectively in the retail mobile market. 852 Then to the extent that it is contended by the ACCC that CKHH and Vodafone Group would prevent MergeCo from accessing equity capital markets in order to avoid their respective shareholdings being diluted, I consider this unlikely. 853 Mr Sixt made this observation on that topic: [Y]ou're in the territory of an extreme failure … of the business combination … because you're postulating that there's … insufficient cash - insufficient earnings … to pay any material dividends … and that funds are required for some purpose … that is so urgent … that an equity raising is required, and debt capital is no longer available. Gosh, you've got to go a long way, right, before you draw the conclusion that such an equity capital raise would ever be necessary.

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MergeCo will roll-out 5G faster than Vodafone on a standalone basis 854 MergeCo's ability to invest additional capex in its network will enable it to offer high-quality 5G services to customers far sooner than Vodafone or TPG would be able to alone. In doing so, MergeCo will have the opportunity to become a more effective competitive constraint on Telstra and Optus. 855 Mr Berroeta's evidence addressed the importance of offering customers 5G services as soon as 5G handsets are readily available. This may be some time away, but the marketing of 5G services has already commenced and this will have a significant impact on consumers. As Mr Berroeta noted, customers with 5G devices will have an expectation that their MNO will be in a position to deliver a 5G service. Mr Berroeta considered that Vodafone will be less competitive in the market if Vodafone is further delayed behind Telstra and Optus in its 5G offering. 856 In my view, 5G is important now and is an important driver of competition. This was the evidence of many witnesses, including Messrs Davies, Ward, Bromhead and Haigh. 857 Telstra and Optus are already well progressed in their respective 5G roll-outs. Optus indicated it would commence its roll-out by early 2019 with fixed wireless products in key metro areas. 858 There is no doubt Vodafone is behind Telstra and Optus in rolling out 5G. However, accepting this was always going to be the case, catching up is important. 859 MergeCo will have the financial capacity required to deploy 5G more quickly, providing the capacity uplift required to provide a competitive service. The increase in the capacity of MergeCo's network will reduce the need to build additional sites or conduct 'tactical' 4G upgrades to relieve immediate congestion issues, a substantial proportion of which is inefficient as it would need to be also replaced in the near future. That will release additional capex which can be directed towards accelerating MergeCo's 5G roll-out. MergeCo's access to 60 MHz of 3.6 GHz spectrum will also enable it to provide a higher quality 5G service with faster speeds for many more years than Vodafone or TPG could offer alone.

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MergeCo will constrain Telstra and Optus 860 MergeCo will be better placed to compete strongly in customer segments, including the low end, high end and enterprise/government segments. MergeCo will have the ability and incentive to compete on price, coverage, quality, network investment, fixed and mobile bundled products and integrated 'whole of business' solutions, and use its multiple brands to appeal to and target particular segments. 861 With the combination of TPG's and Vodafone's complementary fixed and mobile capabilities, the ability to offer whole of business solutions, the increased spectrum and faster path to 5G, MergeCo will have more ability and incentive to compete in the government and enterprise segment. Currently, the enterprise and government segment of the retail mobile market is dominated by Telstra. 862 MergeCo will help with market presence of a combined Vodafone and TPG. Mr Berroeta gave evidence (which I accept) that Vodafone's lack of presence in this segment was due to: The inability of Vodafone to provide a whole of business solution with a fixed and mobile bundled product offering. Vodafone's lack of capability and expertise in offering customised, integrated solutions to larger businesses. Vodafone's inferior network coverage to Telstra. The perception that Vodafone has a less reliable network than Telstra and Optus. Vodafone's network capacity constraints preclude Vodafone from offering large data inclusions in mobile plans or accommodating large increases in customer traffic. 863 Mr Davies accepted that fixed and mobile bundling is generally important to enterprise customers, and that Vodafone did not have a fixed or 'full service' offering that was relevant to such customers. While Mr Davies stated that there is a trend towards enterprise customers seeking unbundled telecommunications services (ie consuming services from different providers), he acknowledged that this was not a 'wholesale move' away from bundling. 864 In my view, MergeCo will be at least in a stronger position to win government and corporate customers compared with Vodafone's current position. MergeCo will have access to TPG and Vodafone's complementary fixed and mobile assets, and with the benefit of TPG's fibre assets will be able to offer product features that Telstra and Optus do not have. In addition MergeCo will have access to more spectrum in the right bands and contiguous configuration, which will allow it to accommodate higher levels of data traffic. Then TPG will bring to MergeCo significant capabilities in offering integrated 'whole of business' solutions, including cloud based technology and hosting services. 865 The competition for government and enterprise customers that is enhanced by the merger is not specifically directed towards the retail mobile market as it extends to the fixed broadband market. However, mobile services are an important component of the services provided in the fixed broadband market. Enhanced competition in that segment means that there is enhanced competition in the retail mobile market. The mobile service that MergeCo can supply is more attractive because it is bundled with other services. 866 As to bundling and cross-selling opportunities that will become available to MergeCo: (1) Approximately XXX of TPG's two million fixed line customers obtain mobile services from a provider other than Vodafone); and (2) approximately XXX of Vodafone's six million mobile customers obtain fixed broadband services from Telstra or Optus (rather than TPG). 867 Mr Berroeta described the size of the cross-selling opportunity that will be available to MergeCo during his cross-examination in the following terms: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX. 868 Mr Berroeta also gave evidence as to the importance of being in a position to provide customers with a bundled product offering as they increasingly demand a 'household solution', which incorporates both fixed and mobile services. 869 Unlike Telstra and Optus, Vodafone's ability to offer a mobile and fixed bundle is very limited. Whilst Vodafone commenced providing a retail fixed broadband service in around December 2017, it does not have a well-known brand in this market and lacks any meaningful presence. That is evidenced by the fact that notwithstanding Vodafone's efforts to penetrate the fixed broadband market, its market share is less than 1%. As Vodafone's fixed offering is limited to broadband services on the NBN, it is difficult to differentiate that service from competitors and is not a substitute for bespoke services which can be offered on TPG's owned fibre network. 870 TPG, on the other hand, has a strong presence in the fixed telecommunications markets and significant fibre network assets. Mr Berroeta thought that a merger between Vodafone and TPG would be an 'obvious strategic step'. 871 Even if both Vodafone and TPG already have the ability to offer bundled solutions, the merger would change the market perception. The fact is that the market does not perceive Vodafone as having an ability to offer bundled service solutions, and with the combination of Vodafone and TPG it is likely this perception will change. 872 MergeCo would impose a meaningfully greater competitive constraint on Telstra and Optus than that which Vodafone would impose without the merger if only for the fact that MergeCo will have the infrastructure to compete and will have the financial capacity to make the investment that is necessary to be a strong competitive force in the retail mobile market. 873 Dr Padilla understood that, absent the merger, Vodafone does not have a realistic solution to its capacity problem in the foreseeable future and this can be expected to significantly weaken Vodafone's ability to effectively constrain Telstra and Optus. 874 The ACCC as one of its contentions said that the investment by MergeCo is likely to be similar to that presently planned by Vodafone and not commensurate with that of Telstra or Optus. 875 I disagree with these contentions; noting at the outset that the analysis is all about a matter of degree. I have already indicated that I accept that the congestion problems contended for by Vodafone in these proceedings are real and will create a competitive constraint in the future. With the merger, the congestion problems may not be solved, but there will be an improvement. As to the investment plans of Vodafone, I accept that its current plans are in many respects 'similar' to those predicted to occur with a merger. However, the implementation of the plans (similar in nature and object) will be more intensive and likely to improve the competitive position of Vodafone (and TPG). I do not consider that the investment will be 'commensurate' with that of Telstra or Optus: this is not expected to be the case, nor is it necessary for this to occur to increase competition. 876 There is some evidence that XXXX XXXX XX amaysim considered that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX. 877 Mr Smith commented that XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX. In Mr Smith's words, '[t]here will be more opportunity for value preservation ... There will be more opportunity for preserving margins'. 878 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX. 879 So much may be accepted. However, this is not to say that there will not be some form of increased competition with a stronger entity in the market to keep Optus and Telstra competitive in price and quality. 880 Dr Padilla and Mr Smith addressed this subject of the consequences that will flow in the retail mobile market into the merger, both in their reports and during the course of the concurrent oral evidence. This evidence is of benefit to the Court in that it provides an economic framework to assess the evidence otherwise before the Court. However, economic evidence must be viewed in the context of the relevant market and the behaviour of its participants. 881 Dr Padilla concluded that the retail mobile market appeared to be currently competitive in both the low end segment and the high end segment, although there was some evidence of Vodafone's competitiveness in the high end decreasing in more recent times. The market was not, however, effectively competitive in the corporate/government sector, with Telstra being 'very strong' in this segment. 882 Dr Padilla concluded that there was lay evidence which indicated that MergeCo would be a stronger competitor than Vodafone is now. Dr Padilla's opinion was informed by the following matters: MergeCo would be in a better position to fund investments in its network, thereby improving network quality. MergeCo would be able to deliver increased capacity and quality through better utilisation of the combined spectrum and infrastructure assets. The additional capacity created by the merger would be expected to lead MergeCo to set lower prices than the parties would set independently. Economic theory shows that firms have an incentive to reduce prices when the cost of supplying additional volumes falls. MergeCo would be able to roll-out a 5G network faster. MergeCo would be better able to cross-sell and offer bundled products. 883 Dr Padilla drew a contrast between this merger and many others: Unlike many other mergers, where it is not clear what the merger will bring for consumers, in this case the combination of the spectrum and network assets of TPG and VHA, the combination of the mobile business of one, Vodafone, and the fixed business of TPG, will create - XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX - a more credible third player. This merger is not a 4 to 3. This merger is a 2 plus 1 and plus maybe 1 into three, and credible third player will emerge. 884 In his report, Mr Smith did not accept that the merger would necessarily improve MergeCo's ability to compete relative to the counter-factual. Mr Smith gave three reasons: 'Merger Specificity', 'Pecuniary Benefits' and 'Substantiality'. 885 Mr Smith's position was that, while there are benefits that flow from the merger, these may not be merger specific because they might be achieved in the counterfactual in any event. The key reason given by Mr Smith was that the merger parties might enter into some form of network sharing arrangement in the absence of the merger and that that arrangement may give rise to 'some' of the same benefits as the merger. The benefits that Mr Smith considered fell into this category were: the combination of the parties' spectrum holdings, and the combination of the parties' RAN infrastructure. 886 Mr Smith's actual response to the significant merger benefits identified by Dr Padilla was that: '[A]t least some of these benefits may be achievable absent the proposed acquisition, in particular through some forms of network sharing arrangements, and accordingly, the relevant portion of these benefits would not be merger-specific'. Mr Smith did not claim any expertise in network sharing arrangements, and it was unclear what sort of network sharing arrangements Mr Smith was referring to. Mr Smith could not be specific in his evidence as to what type of network sharing arrangements he had in mind and how those arrangements would bring about the same efficiencies as the merger. 887 To the extent Mr Smith's merger specificity argument depended on network sharing being a feasible option, in my view, network sharing arrangements are unlikely to proceed in the absence of a merger, and on this topic, Mr Smith's evidence is of no utility. 888 I should add that Mr Foster's evidence on the issue of network sharing was that 'because we don't know the form … we're having to make assumptions', and that it is unlikely that the benefits of entering a network sharing arrangement are unlikely to exceed the costs: '[y]ou're talking about a scenario in which VHA, by agreeing to the sharing, enables a fourth MNO competitor into the market, gives it the ladder that brings it into the market'. 889 Mr Smith then contended that some of the claimed benefits were purely 'pecuniary benefits' in that they might result in increased revenues for MergeCo relative to the revenue that would be earned by Vodafone and TPG as standalone entities in the counterfactual. On this basis he concluded that some of the benefits of the merger 'may' not translate into increased competition. The benefits which fell into this category were the benefits from cross-selling, the enhanced ability to invest due to the debt restructuring from the merger, the use of the fibre backhaul and the elimination of capex and opex. 890 As to the elimination of capex and opex, Mr Smith's view was that these are largely fixed costs and not variable costs and it is only variable costs which have a direct impact on price. Mr Smith also considered that increases in profitability should not be taken into account to the extent the increase arises from less competition following the merger. 891 Dr Padilla's evidence was to the contrary, and is in my view more cogent. 892 Dr Padilla's view was that competition is about more than short term price effects. A key form of competition between MNOs is through investment that increases the quality of their services. Competition in the retail mobile market is dynamic and involves not only price but non-price dimensions. Mr Smith agreed that the retail mobile market is dynamic and that it is important for MNOs to continue investing. 893 Some savings can be savings in variable costs, while others are savings in fixed costs. Both forms of cost savings are important from an economic perspective. Savings in variable costs will be passed on to some degree to consumers in the form of lower prices. Reductions in fixed costs are less likely to be passed on in the form of lower prices. However, fixed cost savings result in increased cash flows. Investment is sensitive to cash flows and, more specifically, how much a firm can invest. As Dr Padilla explained, this is because a firm's cash flow provides a cheaper source of funding than having to raise funds externally on the capital market and empirical studies show that firms with better cash flows invest more. 894 Dr Padilla also noted that the debt restructure effected by the merger leads to higher debt capacity and eventually will lead to higher cash flows. In addition, the merger would also provide MergeCo with a stronger balance sheet and capex depth and its public listing and debt-to-equity ratio would give it better access to external funds. Dr Padilla explained this as follows: [With the debt restructure], [y]our debt to EBITDA … ratio is going to be fundamentally different. Vodafone has now a crazy multiple and it will go to a multiple which is sort of the industry, which means that whenever you need funding, not even internal, but when you need to resort to external funding, you will have cheaper funding. … [Y]ou are going to have more internal funds, you're going to have cheaper access to debt markets, because if you have less leverage, then … equity holders will have much more of an incentive to put money... there, because the bankruptcy risk falls significantly. 895 This is all consistent with the evidence of market participants. 896 Mr Smith concluded in his report that some of the claimed benefits might not substantially affect competition in the factual relative to the counterfactual. Mr Smith agreed that the extent of efficiencies was best determined by other witnesses in the proceeding. Mr Smith agreed that he could not say that the ability of Vodafone to compete with Telstra and Optus would not be enhanced with the merger. Mr Smith agreed that other witnesses in the case were better placed then he was to make this assessment also. 897 In the end, the merger parties submitted that the acquisition would substantially increase the competitiveness of MergeCo relative to a standalone Vodafone and TPG for the following four key reasons: (1) the complementary spectrum holdings of MergeCo would increase MergeCo's network capacity and ability to compete with Telstra and Optus; (2) by combining two complementary businesses - namely, Vodafone's mobile focused business, and TPG's fixed broadband focused business - MergeCo will have significant cross-selling opportunities, improved ability to offer bundled products that are desired by customers, and an improved product offering for business and enterprise customers; (3) the ability of MergeCo to fund investment in network capacity will be increased, because MergeCo will benefit from an improved balance sheet (which increases its debt and equity fundraising capacity), cost synergies and the benefits of economies of scale; and (4) MergeCo would be able to roll-out 5G faster, which lowers the risk of it being competitively disadvantaged as a 5G latecomer relative to Telstra and Optus. 898 On the basis of the evidence, I accept each of these submissions, although in each case it is a matter of degree to the extent the competitiveness is increased by each of the four factors. However, I am left in no doubt that a combination of those factors will increase the competitiveness of MergeCo relative to a standalone Vodafone and TPG.

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2.1 2017 Spectrum auction 15 On 29 January 2016, TPG's Board noted that: 'Long-term we have to be in the mobile space - the future is mobile. The initial investment may feel expensive now but it is the right thing to do for the long-term benefit of the Company'. 16 Around April 2016, TPG approached the Commonwealth Government to acquire the remaining 2 x 15 MHz of 700 MHz spectrum that was not sold in the 2013 auction, and made an offer in August 2016. The Commonwealth Government rejected these offers. 17 On 29 July 2016, TPG's Board noted that: 'The industry is changing dramatically. The Consumer business outlook is very tough because of NBN margins … VHA has submitted a request to the government to purchase 210MHz of the remaining 215MHz spectrum … Although this, together with the equipment and towers would be a heavy investment, it is very strategically important for our Group's future'. 18 In August 2016, Mr Teoh wrote to the Assistant Secretary of the Spectrum Branch at the Department of Communications and Arts, offering to license that spectrum for approximately $857 million. 19 On 26 August 2016, TPG's Board noted that: 'DSL to NBN migration will create pressure for the Group so we need to look beyond the NBN for growth. In the long-term, mobile will become very important. 5G will be in operation by 2020 and will be capable of threatening fixed business. It is vital therefore that we focus on investing in mobile infrastructure. It will be a massive task and has investment risk but it would be a worse strategy to do nothing'. 20 In October 2016, ACMA announced it would auction the 700 MHz spectrum in April 2017. 21 On 24 February 2017, TPG's Board considered whether to participate in the 700 MHz auction and noted: 'This is a very important opportunity for the Company and a very serious decision for the Board. The mobile market is massive and future industry growth will be driven by mobile. We already have the core network, the people and the fibre backhaul in place and a large customer base to cross market to so the opportunity for our Group is huge. With the NBN and other government regulation making conditions tough for our fixed business, growth for our Group will be challenging going forwards if we don't move into mobile … The size of the initial investment in spectrum and network rollout will cause some financial pain for a few years and the network rollout will be a challenging exercise, but if we do it successfully we will be in a fantastic position in the industry'. Mr Banfield presented the financial model to the Board. 22 On 31 March 2017, TPG's Board approved a $1 billion limit for bidding at the upcoming 700 MHz auction. In coming to its decision, the Board referred to the financial model prepared by Mr Banfield. 23 On 3 April 2017, Vodafone's Board approved Vodafone's participation in the upcoming 700 MHz auction with bid limit of $710 million for 2 x 10 MHz lot and $450 million for 2 x 5 MHz lot. On 4 April 2017, Vodafone's Board increased the bid limit for 2 x 10 MHz lot to XXXX XXXX, and 2 x 5 MHz lot to XXXX XXXXXX. 24 On 4 April 2017, the auction of 700 MHz of spectrum began. 25 On 5 April 2017, TPG's Board approved the increase to the bid limit for the 700 MHz spectrum auction to $1.115 billion. On 6 April 2017, TPG's Board approved an increase to the bid limit for the 700 MHz spectrum auction to $1.261 billion and Mr Banfield prepared a further version of the financial model. 26 On 10 April 2017, at the conclusion of the auction, TPG had acquired 2 x 10 MHz lots of 700 MHz spectrum in the auction for $1.26 billion. Vodafone acquired 2 x 5 MHz of 700 MHz spectrum for $285.9 million. The licences commenced on 1 April 2018 and will expire on 31 December 2029. TPG and Vodafone have yet to deploy this spectrum. Macquarie Capital indicated to TPG that it will proceed with the underwriting XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX. 27 On 11 April 2017, TPG provided the 10 April version of Mr Banfield's financial model to Macquarie Capital and draft due diligence questionnaire response. 28 On 12 April 2017, TPG announced its intention to roll out a mobile network comprising 2,000-2,500 macro RAN sites supported by small cell sites, with 80% population coverage and trials planned for 2018. The announcement set out TPG's commitment to purchase its 700 MHz spectrum for $1.26 billion, plus $600 million for network roll-out over a three year period.

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3.5.1 XXXX XXXX XXXX XXXX 57 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 58 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 59 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 60 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXX XXXX XXXX XXXXXX XXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX. 61 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 62 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 63 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX. 64 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XX. 3.5.2 Roaming negotiations XXXX XXXXX 65 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX. 66 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXXX XXXXX XXXX XX. 3.5.3 Roaming negotiations with Vodafone 67 On 31 May 2017, Vodafone responded to TPG stating that roaming agreements tend to be bespoke and proposing a meeting as a first step. 68 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 69 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX. 70 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 71 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX. 72 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX.

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4.2 May 2018 business plan and move to small cells 79 On 28 April 2017, TPG's Board noted that: 'Deploying small cells on poles would reduce the number of macro sites we need to deploy and could be more cost effective. Maximising use of small cell sis also the right approach as it increases capacity and is the right platform for 5G'. 80 On 26 May 2017, TPG updated its Board that it is trying to adopt a small cell approach rather than a macro cell approach. 81 On 19 September 2017, TPG announced it will build a predominantly small cell network complemented by some macro RAN sites, and that its small cell sites will be key parts of a future 5G mobile service. 82 In October 2017, TPG completed the selection of its major vendors (including Huawei) for its mobile network roll-out. 83 On 2 November 2017, Mr Teoh approved the first purchase of Huawei equipment. 84 On 7 December 2017, TPG announced that its MNO strategy was now to 'deploy a primary small cell network across metropolitan areas, complemented by a traditional macro network'. TPG changed the network design in order to maximise the capacity and throughput of its network, given its limited spectrum holdings. 85 On 2 February 2018, TPG's Board noted: 'Australia Mobile: The project is proceeding in line with plan. … The equipment installation is relatively simple. Connecting fibre to the poles is the bigger job. But the fibre backhaul will be so valuable, especially for 5G. The speed of change for the industry when 5G comes in in [sic] the next one to two years will be huge. Optus has already announced plans for 5G fixed wireless in 2019. 5G will make it very difficult for the NBN to compete. The next 18 months will be hard work, but we are on the right track and are progressing well. It will be important to acquire some 5G spectrum. The 3.5GHz spectrum that may be auctioned this year will be the most valuable'. 86 On 13 April 2018, TPG was first informed by Huawei of the planned future 16T16R AAU product. 87 On 9 May 2018, TPG announced that it expected to begin trials of its mobile network and offer trial plans in particular metropolitan suburbs in Q3 or Q4 2018. TPG announced that its new mobile plan would: a) be available to the first TPG customers for free for the first six months; b) include unlimited data, with the first 1 GB of data every day supplied at uncapped 4G LTE speeds, after which speed would be capped at 1 Mbps for the remainder of the day (which is sufficient for streaming standard definition 360p video); c) cost $9.99 per month after the trial period; d) be a SIM-only plan with no lock in contract; and e) would provide mobile data only, and mobile voice and SMS were unavailable. 88 At this time, the business model was based on the assumption that the price for the mobile plans would increase to $15 per month after the first 12 to 18 months, by which point the network was expected to have greater coverage, and voice and messaging services would be available. 89 On 25 May 2018, TPG's Board noted: 'We have announced the suburbs where we expect trial services to be available in 3Q/4Q this year, with a six-month free trial period followed by $9.99 per month for unlimited downloads with speed throttled after 1GB per day which has created quite a stir in the market. We are confident that this value will attract significant customer interest in the value conscious demographic and be difficult for incumbents to compete with on price. The $600m capex budget is still looking achievable. Keeping average fibre connection cost per pole below $20k is critical to staying within the budget and we have given this a lot of attention and it is looking promising'. 90 XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXXXX.

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5.4 Vodafone analyses of congestion and 5G upgrade issues 127 Since mid-2018, network congestion has become an increasingly important issue for Vodafone. 128 In around June 2018, Vodafone's executive team began to discuss the issue of congestion on Vodafone's network at its weekly meetings. 129 On 25 June 2018, Vodafone wrote to the Prime Minister stating that 'VHA's immediate plan is to upgrade only a portion of our RAN to 5G within the next 3 years, and only undertake a wider upgrade as required by wireless demand and traffic growth'. 130 On 30 June 2018, Hutchison Telecommunications (Australia) Limited's results for the half-year to 30 June 2018 state that 'VHA continues to perform strongly in a competitive environment' and that 'HTAL remains committed to its investment in VHA, and will continue to support VHA's growth in the future'. 131 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX. 132 On 29 November 2018, the Vodafone Board approved the 2018-22 LRP (also approved by the shareholders). The LRP includes provision for acquisition of further spectrum and capital expenditure. 133 In December 2018, Vodafone issued the request for proposal to each of XXXX XXXX XXXX XXX to swap its RAN infrastructure due to the Security Guidance. 134 On 21 February 2019, the Vodafone Board confirmed Vodafone's annual financial report for the year ended 31 December 2018, which states that Vodafone has the continued 'backing of its ultimate shareholders'. 135 On 27 February 2019, Hutchison Telecommunications (Australia) Limited published its results for the year to 31 December 2018, which states that '[w]ith strong support from [CKHH] and its joint shareholders Vodafone Group pls, VHA is well-placed to continue achieving steady, modest customer growth'. 136 In March 2019, Vodafone issued a revised request for proposal for its RAN refresh. 137 In May 2019, Vodafone issued the second request for proposal for its RAN refresh. 138 In June 2019, Vodafone's technology team estimated that XXXXXX XXXXX sectors (each sector usually comprising a third of the antennas on a mobile site) in the XXX XXX Australian cities in its network were congested. 139 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX. 140 On 19 June 2019, Mr Lopez presented a more comprehensive slide pack of the modelling results to Mr Berroeta and Vodafone's Commercial Managers. XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX: a) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXX XXX XXX XXX XXXX XXX XXXX XXXX XXX b) XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX. 141 On 29 July 2019, Vodafone set out its up-to-date network modelling in its RAN Refresh update. 142 Over the same time period, Vodafone also faced significant issues in respect of its plans to upgrade its network to 5G. Due to the Security Guidance, Vodafone cannot use Huawei equipment on its RAN or transmission networks to transmit 5G mobile signals. 143 As a result, Vodafone ceased negotiations with Huawei for the Project X upgrades and issued a RAN RFP and Transmission RFP to undertake a complete swap and service migration to enable it to carry 5G traffic. This will delay the RAN Refresh upgrades by at least X XX XXX months while Vodafone selects an alternative equipment vendor. Vodafone expects shortly to select a vendor for its RAN Refresh upgrade. 144 In August 2019, Vodafone received a final proposal XXXX XXXX XXXX XXXX XX regarding a RAN equipment swap. 145 On 4 September 2019, Vodafone made an internal recommendation to select XXXXX for RAN Refresh, with upgrade proposed to occur over 3 years, rather than 4 years previously modelled.

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5.5 Refresh of mobile plans 146 On 25 June 2019, Telstra launched a 'refresh' of its post-paid plans. This introduced major changes to the structure of Telstra's mobile plans, with all plans now having 'month to month' no lock-in terms and 'endless' data, with speeds throttled to 1.5 Mbps at different data volumes depending on the price point of the plan. 147 In July 2019, Vodafone launched its own refresh of its post-paid plans. This included, in response to Telstra's changes, the introduction of 'endless' data at a lower price point than previously available (on its $45 plan), with speeds throttled to 1.5 Mbps once customers reach the 30 GB data allowance. In September 2019, Telstra introduced four data SIM plans starting at $15 per month for 5 GB. All of these plans include 'endless' data, with speeds throttled to 1.5 Mbps once customers reach their data allowance, and free access to Telstra's 5G network until 30 June 2020. Calls and SMS are not included in the plan, but can be made at extra cost. ANNEXURE 'B' Agreed Technological Primer No. NSD818 of 2019 Federal Court of Australia District Registry: New South Wales Division: General Commercial and Corporations National Practice Area (Economic Regulator, Competition and Access) Vodafone Hutchison Australia Pty Limited Applicant Australian Competition and Consumer Commission and another Respondents A Mobile Network Design and technologies A.1 Spectrum A.1.1 Spectrum is an essential input in the supply of mobile services A.1.2 As a national asset, the use of spectrum is regulated A.1.3 Spectrum regulation in Australia A.1.4 Current Spectrum holdings in Australia A.2 Components of a mobile network A.2.1 Radio access network A.2.2 Transmission network A.2.3 Core network A.3 Capacity and Coverage A.4 Roaming Agreements A.5 Evolution in mobile technologies A.6 5G mobile network technology vendors A.7 Mobile networks in Australia Appendix A: Glossary Appendix B: Spectrum Illustrated A glossary of terms used in this Agreed Technology Primer (the Primer) is provided in Appendix A. The Primer is intended to be a general description of mobile network technology and how it is used. For example, this document does not deal with the specifics of TPG's network plan or the proposed utilisation by TPG of small cells. The parties to these proceedings agree that the facts in the Primer are "agreed facts" as defined in and for the purposes of section 191 of the Evidence Act 1995 (Cth) (the Evidence Act). In accordance with section 191(2) of the Evidence Act, the parties agree that: evidence is not required to prove the existence of any fact agreed in the Primer; and a party may not adduce evidence to qualify or contradict any facts agreed in the Primer.

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A.1.1 Spectrum is an essential input in the supply of mobile services 3 Electromagnetic spectrum refers to the range of frequencies used to emit electromagnetic radiation. The electromagnetic spectrum is a continuous range of frequencies extending from the longest radio waves through to infra-red, visible light, ultra-violet, X-rays and gamma-rays. 4 Not all electromagnetic spectrum is used for radiocommunications. The radiofrequency spectrum (RF spectrum or simply spectrum) is that part of the total electromagnetic spectrum which is used for transmitting radio waves. Appendix B is a chart showing how the radiofrequency spectrum is used in Australia. As Appendix B shows, not all radiofrequency spectrum is used for mobile telecommunication services. 5 Spectrum is an essential input in the supply of mobile telecommunication services. Voice and data communications between mobile devices and a Radio Access Network (RAN) cannot occur without the use of appropriate and compatible spectrum. 6 The range of spectrum used for mobile telecommunication, commercial radio and other broadcast services (all forms of commercial radiocommunications) is generally limited to Very High Frequency (VHF) (30-300 MHz) and Ultra High Frequency (UHF) (300 MHz to 3 GHz) as this is currently most suitable, though frequencies between 6 GHz and 300 GHz are also useable for this purpose. Frequencies above 300 GHz are not used for commercial radiocommunications. 7 The frequencies used for mobile telecommunications in Australia are generally divided into three broad categories: a) low band (between 700 MHz to 1 GHz); b) mid band (1 GHz to 6 GHz); and c) high band (above 6 GHz). 8 There are significant differences in the attributes of spectrum of different frequencies. Given these differences, an MNO will typically seek to have a range of spectrum to take advantage of the different attributes of the various frequencies as described in paragraphs 9 and 10 below. 9 For example, low band spectrum has greater propagation characteristics than mid band and high band spectrum - that is, the signal strength of radio transmissions at low band frequencies incurs less loss as it travels through a medium and is therefore maintained over longer distances, and penetrates better through obstacles such as trees. This means it provides superior coverage over broader geographic areas and superior in-building coverage. For example, 700 MHz spectrum propagates significantly further than 2.5 GHz spectrum. Similarly, millimetre wave spectrum (for example, 26 GHz) has not been used for generations of mobile technology prior to 5G due to its relatively poor propagation characteristics. 10 There is a finite amount of all spectrum, with the range of frequencies of low band spectrum being the most limited compared to mid and high band spectrum. The mid and high spectrum bands provide less coverage (including in-building coverage) than low band spectrum. As a wider range of frequencies (bandwidth) in the mid and high frequency spectrum bands are available, mid and high frequency spectrum bands provide greater capacity (the ability to carry more data) relative to low band spectrum.

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A.1.2 The use of spectrum is regulated 11 Generally speaking, radio receivers (such as RAN equipment and mobile devices) are not able to distinguish between multiple simultaneous transmissions on the same frequency in the same geographic area. It is generally not desirable for example, for different mobile operators, or mobile operators and radio or TV broadcasters, to attempt to use the same spectrum bands to simultaneously transmit signals. This would cause interference which manifests as degraded quality and would result in failed communications (e.g., dropped calls or delays in transmission of data). 12 The use of spectrum is partitioned and highly regulated, locally and internationally, both to prevent interference between different users and different uses of spectrum, and to promote harmonisation between Australians' use of spectrum and the use of spectrum in other countries. 13 Internationally, the International Telecommunication Union (ITU) coordinates a global standardisation process through which specific spectrum bands are designated for different services (television, satellite, military, mobile, etc.). Telecommunications equipment providers then develop their equipment and technologies in accordance with the ITU's designation to ensure that they operate using standardised spectrum bands and spectrum configurations. 14 At the national level, there is a further level of regulation where the relevant government authority in each country designates what parts of the spectrum allocated for mobile use by the ITU will be used in that country by particular MNOs and on what terms. 15 As a result of this international and national regulation of spectrum, it is not possible for an MNO in Australia to decide to use any spectrum band it wishes. Spectrum needs to be designated internationally and allocated nationally for a specific use (e.g. mobile telecommunications), and global manufacturers need to manufacture and offer equipment and devices which are compatible with those specific spectrum bands.

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A.1.3 Spectrum regulation in Australia 16 In Australia, the allocation of particular parts of the spectrum to particular users for particular uses is regulated by the Radiocommunications Act 1992 (Cth) (Radiocommunications Act), which provides for:1 a) the preparation of a spectrum plan by the Australian Communications and Media Authority (the ACMA), which must: i) divide into such number of frequency bands as the ACMA thinks appropriate so much of the spectrum as the ACMA thinks necessary for the purpose of regulating radiocommunications; and ii) specify the purpose(s) for which each spectrum band may be used; b) the designation by the Minister, after consultation with the ACMA, of a specified part of the spectrum to be allocated by issuing spectrum licences; c) the preparation by the ACMA of marketing plans for issuing spectrum licences following a ministerial designation; and d) the licensing of spectrum licensees to use particular parts of the spectrum as specified in each spectrum licence, as well as provisions making it unlawful to use a radiocommunications device otherwise than as authorised by a spectrum licence (or an apparatus licence or class licence) issued under the Radiocommunications Act. 17 To allocate spectrum licences for mobile telecommunications, the ACMA has generally conducted auctions for rights to use certain bands of spectrum in certain geographic areas. 18 To operate a mobile network in Australia, an MNO must acquire rights to use licensed spectrum for the geographic areas in which the mobile network is intended to operate. 19 The low bands used in Australia currently fall in the 700 MHz, 850 MHz and 900 MHz ranges and can be used for 3G, 4G and later 5G services.2 These bands have better coverage characteristics (including in-building coverage) and usually form the foundational coverage layer of mobile networks but are not suitable for carrying large amounts of traffic (relative to mid-band and high-band spectrum) as they are not allocated with a wide range of frequencies (bandwidth) for mobile telecommunications. 20 The mid bands used in Australia currently fall in the 1800 MHz, 2100 MHz, 2300 MHz and 2600 MHz ranges and can be used for 3G, 4G and later 5G services (when relevant 5G equipment and handsets supporting these bands are available). These bands have a shorter coverage range and less ability to provide coverage into buildings than low bands. However they are allocated with a wider range of frequencies (bandwidth), which makes them suitable for carrying larger amounts of traffic in dense areas. 21 Spectrum in the 3.4 GHz to 3.7 GHz frequency band (also mid-band spectrum) has been made available in accordance with the Radiocommunications Act including for use for 5G mobile services, and the 3.6 GHz band is the original band for 5G mobile services in Australia. 22 High Band Millimetre Wave (mmWave) spectrum is the set of spectrum bands emerging for use in mobile networks. In Australia, this will initially be in the 26 GHz frequency range. The characteristic of this frequency range is that it delivers a very short range, mainly line of sight, coverage. 23 Most standards from 1G to 4G3 have used the Frequency Division Duplex (FDD) configuration where ranges of frequencies are allocated in each of two directions (like a two way road), one range for transmission from the base station to the mobile device (downlink) and a second range of frequencies (the duplex) for transmissions from the mobile device to the base station (uplink). Separating these different directions of transmission into different frequencies prevents interference and allows simultaneous transmission to/from the base station. 24 More recent 4G and now 5G standards use an alternate frequency and transmission configuration known as Time Division Duplex (TDD) where the same frequencies are used to both send and receive between the mobile device and the base station. In order to avoid interference between the transmissions, the transmissions are divided in time (like sharing directions on a one-way road). In this configuration, when there is more data being transmitted from the base station to the mobile device than in the reverse direction, more of the time is allocated to downlink transmissions.

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29 On 30 August 2018, TPG JV Company Pty Ltd (a wholly-owned subsidiary of TPG) and Vodafone Hutchison Spectrum Pty Limited (a wholly-owned subsidiary of VHA) entered into a joint venture agreement (Mobile JVA) pursuant to which they agreed to establish a joint venture company (Mobile JV Pty Limited). The objectives of Mobile JV Pty Limited are to optimise the acquisition, ownership, and supply (such as by sub-licensing) of licences to use parts of the spectrum by Mobile JV Pty Limited. 30 The Mobile JVA provides that in the absence of any approved plan by the Mobile JV Pty Limited Board, the parties to the Mobile JVA must allocate and sub-license spectrum licences acquired by Mobile JV Pty Limited to each shareholder or its nominee according to certain principles, including that, absent some other agreement, in areas where the two shareholder groups have not formed a shared RAN, the spectrum licence for any geographic area will be sub-licensed to each shareholder (or shareholder nominee) on the basis that each shareholder group will have equal spectrum bandwidth.11 In other words, the default position in such circumstances is that Mobile JV Pty Limited will sub-license spectrum equally between the TPG and VHA groups. 31 The Mobile JVA is not conditional on the successful implementation of, and will survive the termination of, the Proposed Acquisition.12 32 If the Proposed Acquisition is completed, Mobile JV Pty Ltd will become 100% owned by Merge Co. 33 On 10 December 2018, Mobile JV Pty Limited acquired the following lots of 3.6 GHz spectrum at a cost of $263.3 million: a) 60 MHz metropolitan lots in each of Sydney, Melbourne, Brisbane, Canberra, Adelaide and Perth; b) 40 MHz regional lots in Central Queensland, Northern Queensland, Southern Queensland/Regional Northern NSW, Regional Victoria and Tasmania; c) 45 MHz regional lots in Regional Western Australia; d) 30 MHz regional lots in Regional Southern/Western NSW; and e) 20 MHz regional lots in Regional South Australia. 34 The spectrum lots referred to in paragraph 33 currently comprise all of Mobile JV Pty Limited's spectrum holdings. 35 The ACMA is not scheduled to auction further mobile spectrum until July to December 2020, at which time the ACMA has indicated that it may auction 26 GHz mmWave spectrum and/or 850/900 MHz spectrum.13 The 900 MHz spectrum that is proposed to be auctioned is currently apparatus licensed to Telstra, Optus and VHA.

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A.2.1 Radio access network 40 The RAN usually consists of a large number of base station sites. The base station sites are deployed at locations that enable the RAN to provide mobile network coverage across a geographic area. 41 A base station site uses spectrum to communicate with a user's mobile device by transmitting and receiving signals to and from the device, and provides mobile network coverage to mobile devices within that proximate geographic area. 42 The geographic area served by a base station site depends on a number of factors including, the output power of the radio equipment on that site, the spectrum bands used, the height at which the antenna is deployed and the surrounding topography and environment such as the presence of trees, hills or buildings. 43 The following equipment is typically deployed at a base station site: a) one or more antennas and radio units, which transmit and receive radio frequency signals to and from mobile devices in the spectrum bands that the MNO has acquired the right to use; b) a baseband unit, which processes signals and communicates between the multiple attached radio units on a base station site and the broader network and core network; and c) related supporting infrastructure such as cooling, power and battery backup, site supervision and backhaul transmission system. 44 A diagram showing the typical arrangement of the radio equipment at a base station site with two MNOs appears below: Note: This is one example of a macro base station site configuration. 45 The equipment deployed at a base station site may be mounted on different structures, such as: a) communications tower or pole, or water tower (a tower); b) the sides of buildings or on its rooftop; c) power pole, lighting pole, traffic pole or utility pole (a pole); or d) other suitable structures; (collectively referred to as, a structure). 46 As discussed further in paragraphs 55 to 57, Macro RAN sites are typically deployed on towers, the sides of buildings or rooftops. Small cell sites are typically deployed on poles. Radio units 47 The radio unit(s) deployed at a base station site may comprise a "remote radio unit" (RRU), which is installed on the structure, or an in-cabinet unit which is installed in a cabinet near the base of the structure. In general terms, it is preferable to install the radio unit closer to the antenna to minimise the length of the connecting cable as this minimises signal loss. There are corresponding challenges, however, as this increases the size, weight and complexity of the equipment to be located on the base station site's structure. 48 Some newer 4G technologies and 5G mid-band and mmWave band technologies combine the radio unit and antenna elements into a single radio and antenna package. This is known as an active antenna unit (AAU). AAUs may use a large number of antenna units, typically 16 or more, which is known as Massive MIMO. It is generally not feasible for RRUs to have Massive MIMO capability. Massive MIMO is explained in paragraph 49 below. 49 MIMO means "Multiple Input Multiple Output" and refers to a radio transmission technique where multiple signals are sent and received from different antennae to create additional data bandwidth. In mobile networks, typically 2 to 4 antennae are used for MIMO transmission. Massive MIMO refers to MIMO transmission with a much larger number of antenna units, at this stage, typically available from vendors with between 16 and 128 antenna units to transmit signals and the same number of antenna units to receive signals.14 A Massive MIMO AAU can both take advantage of the benefits of sending a number of data streams to an individual or many receiving mobiles as per MIMO, as well as being able to direct the signal beam towards the target mobile(s) or to reduce interfering signals received from unwanted mobiles ("beam forming"). 50 Generally, the more powerful a radio unit, the better its signal and the greater coverage and capacity it can provide. As the power of a radio unit increases, the size, weight and electricity requirements of the radio unit generally also increase, which may affect the places in which the radio unit can practically be deployed. The size of the antenna can also affect the coverage and capacity provided by a base station site. Baseband units 51 In some 4G and evolving 5G network configurations baseband units can be centralised to co-ordinate a larger geographic area of multiple base stations. This places the baseband unit at a point of central control and co-ordination known as a baseband hotel, Central-RAN (C-RAN) or Cloud RAN configuration, rather than at each base station site. These configurations rely on optical fibre connection and/or high speed data lines to connect the RRUs from each cell to the C-RAN location. C-RANs are new emerging technology around the world. They can only practically be deployed where there is a dense arrangement of base station sites (i.e. a number of base station sites located in close proximity to the baseband hotel). 52 A base station site can only receive and transmit signals over certain compatible bands of RF spectrum. This is because the equipment in the base station site has been designed and configured to operate only on particular configurations of specific spectrum bands. If an MNO acquires new spectrum in a different band (or in some cases even in the same spectrum band), it may be required to replace components in its RAN or add additional RAN components in order for the network to communicate using the new spectrum frequencies. 53 The same is true when there is a generational change in the mobile technology used by a RAN (see section A.5 below for a description of different mobile technology generations). Such a generational change will usually necessitate some equipment in the base station sites being replaced or upgraded to support the next generation of mobile technology. Generational change in mobile technology may also require some mobile devices attaching to that network to be replaced. New mobile technology generations are generally backwardly compatible and therefore do not generally require the replacement or upgrade of all base station site equipment or mobile devices. Macro RAN sites and small cell sites 54 In general terms, MNOs deploy two main types of outdoor base station sites in a mobile network: macro RAN sites and small cell sites. These are pictured below: Small Cell Site Macro RAN Site 55 Macro RAN sites provide coverage over a large geographic area. Macro RAN sites are typically located at a height of 15 to 30 metres above the ground and overlook a wide area, where the radio waves can propagate above trees and surrounding buildings and terrain, or other obstructions. Macro RAN sites typically carry heavier, larger and higher-powered equipment relative to small cell sites. 56 Macro RAN sites are typically located on the rooftop or sides of buildings, towers (as depicted in the macro RAN site image above in paragraph 54) and other elevated structures which are strong. A combination of the equipment on macro RAN sites and the cost associated with leasing and erecting the structure on macro RAN sites means that they are generally significantly more expensive to deploy than small cell sites (on a per site basis). 57 Small cell sites provide coverage over a smaller geographic area than macro RAN sites. Small cell sites are base stations located on poles, street furniture or other lower structures. Small cell sites are typically located at a height of 3 to 10 metres above the ground, which is below the height of surrounding infrastructure and buildings. This impacts the effectiveness of the propagation of radio waves achievable from small cell sites and therefore the coverage provided by small cell sites, as compared to macro RAN sites, although the actual coverage area will vary depending on factors such as the output power of the small cell site and the surrounding topography and environment. Small cell sites also typically carry lighter, smaller and less high-powered equipment than macro RAN sites, which lowers the capacity and coverage which can be provided through a small cell site as compared to a macro RAN site. Capacity and coverage in the context of a mobile network are explained in paragraphs 75 and 76 below. 58 Small cell sites are typically used by MNOs to complement macro RAN sites, to provide additional capacity or address deficient coverage in a specific location (e.g., inside buildings or densely populated areas like transport hubs), or at locations that could not support a macro RAN site. 59 The diagram below shows examples of small cell site configurations on utility poles: 60 Telstra, Optus and VHA's existing mobile networks in Australia primarily comprise macro RAN sites. 61 No mobile network in Australia currently uses small cell sites as the principal means of delivering coverage across its RAN. All existing mobile networks in Australia use macro RAN sites for this purpose. 62 In addition to macro RAN sites and small cell sites, there are also in-building systems that are designed to serve signals inside buildings such as in some CBD areas (e.g. shopping centres, transport tunnels and underground carparks). These consist of distributed antenna systems cabled throughout the building or tunnel. These are referred to as in-building coverage systems. Due to their costs, in-building coverage systems are typically only deployed where the MNO is unable to provide sufficient in-building coverage through the closest macro RAN site. 63 A macro RAN site of one MNO can be co-located on a structure at an existing base station site of other MNOs. With co-located macro RAN sites, the structure is shared but each MNO installs its own antennas and other equipment.

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A.2.2 Transmission network 64 In a mobile network, transmission networks provide a link between the RAN and the core network and transmit base station control signals as well as information (voice, SMS, and data traffic) between the two. 65 Transmission networks may utilise a range of technologies, including optical fibre, coaxial cable, copper cables, satellite or microwave links. 66 Transmission networks are also used to connect the core network with other networks such as other domestic and international mobile and fixed phone networks, and major Internet Points-of-Presence. 67 The services supplied over transmission networks are known as "transmission", with "backhaul" services referring to transmission between a base station site and the core network. Transmission services enable large volumes of aggregated communications traffic to be carried from one point to another. 68 MNOs can self-supply transmission services if they have their own transmission network. Alternatively, MNOs can utilise third-party transmission infrastructure for this purpose. Where third-party infrastructure is used, an MNO can either acquire transmission services from the third party, or instead lease "dark fibre" (unused optical fibre cores in optical fibre cable that has been deployed by a third party) and use its own optical transmission equipment to provide transmission services over that dark fibre. 69 Transmission networks are typically designed in a ring topology which means that a number of base station sites are often connected to a common aggregation point before connection to the core. One of the key reasons for this is a requirement for redundancy. Each base station site is connected via at least two routes, making it possible to continue delivering transmission services to a base station site through one link when one of the other fibre links in the ring is severed. Transmission networks can also be designed in a hub and spoke topology. 70 There is also a backhaul architecture option available known as Cloud RAN or C-RAN (described above at paragraph 51). MNOs may choose to invest in this new architecture, depending on the MNO's current transmission network architecture and the cost of deploying a C-RAN. 71 The diagram below shows this new backhaul architecture option.

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A.5 Evolution in mobile technologies 78 Mobile technology has developed over time. These developments are reflected in changes in the industry standards applicable to mobile technology. Such standards facilitate interoperability between mobile network equipment, mobile devices and the spectrum used to communicate between mobile networks and devices. 79 There are broadly five "generations" of mobile technology that have developed globally. 80 The first generation of mobile technology (1G) was developed in the 1970s and 1980s. 1G technology was based on analogue technology and the standards were developed both nationally and regionally. 1G mobile networks and devices could only be used for voice calls and did not support SMS messaging or data services. 1G did not permit international roaming and the different 1G technologies were not interoperable - for example, a North American Advanced Mobile Phone System (AMPS) handset could not connect to a British TACS network. 81 The second generation of mobile technology was developed in the early 1990s. In Europe, the European Telecommunications Standards Institute (ETSI) oversaw the development of the Global System for Mobile Communications (GSM), which is a standard for mobile devices now commonly referred to as "2G". 82 2G mobile technology was digital. While 2G mobile technology was primarily designed to support voice services, it also facilitated new features in mobile technology such as SMS and international roaming. 83 The GSM standard defined all inter-working technical aspects of mobile equipment, devices and spectrum bands which allowed different equipment to be used by different network providers and different handsets to be used with different networks. This helped to facilitate a harmonisation of mobile telecommunications across borders and allowed devices to roam on other networks. By the mid-1990s, GSM was used in a number of countries around the world, including by operators in the United States, Asia and Australia. The primary other 2G standard was CDMA (Code Division Multiple Access), which was primarily used in the USA and Russia, while other 2G standards such as Digital AMPS (D-AMPS) were used in North America, South America and Korea. 84 As 2G technology developed, it became capable of providing limited data services with data speeds of approximately 20 to 150 kilobits per second (Kbps), which was enough for slow web browsing (primarily for text and small images) and email. 85 In the late 1990s and early 2000s, the third generation of mobile technology (3G) was developed. 86 In Europe, the 3G Partnership Project (3GPP) was created under ETSI to develop a 3G standard which became known as the Universal Mobile Telecommunications System (UMTS). In the US, the Telecommunications Industry Association and American National Standards Institute developed a separate 3G standard known as CDMA2000. The International Telecommunication Union (ITU) created an overarching capabilities requirement known as "IMT-2000", the fulfilment of which enabled different technology standards to be deemed 3G. Both UMTS and CDMA2000 complied with IMT-2000, but they were not compatible so European UMTS devices and CDMA2000 devices could not connect on each other's network. 87 The development of 3G technology facilitated much greater data use by mobile devices. When 3G was first introduced, it offered data speeds of up to 384 Kbps. As 3G technology improved under the High Speed Packet Access (HSPA) standards, this increased to about 21 megabits per second (Mbps) (21,000 Kbps) for a single 5 MHz carrier and 42 Mbps peak speeds under Dual Carrier HSPA (DC-HSPA) using two 5 MHz carriers. 88 The fourth generation of mobile technology (4G) was developed in the mid-2000s and MNOs began offering services on 4G mobile networks from 2011. 89 The ITU created a capabilities requirement for 4G mobile technology known as "IMT Advanced". The first technical standard to achieve this was developed by 3GPP/ETSI and is known as "Long Term Evolution" (LTE). The LTE standard facilitated peak theoretical data speeds of up to 150 Mbps for a Category 4 device using 20 MHz of spectrum. 90 As with earlier technologies, 4G standards have continued to develop over time whereby new categories of devices with the aggregation of multiple combinations of 20 MHz LTE carriers can theoretically deliver peak speeds of over 1 Gbps. 91 The speeds in paragraphs 89 and 90 above are theoretical speeds and typical user speeds are usually much lower than peak network speeds due to multiple users sharing the bandwidth and the impact of varying radio conditions. Today, typical average speeds on a 4G network can range up to a few 10s of Mbps, depending on the spectrum available and the number of users. 92 4G LTE networks are backwardly compatible with 2G GSM and 3G UMTS networks. In Australia, 4G LTE networks were initially deployed alongside existing 2G and 3G networks, which continued to operate. Over time, Australian MNOs began shutting down their 2G networks to redeploy (or "refarm") spectrum for use in their 3G and 4G networks. 93 5G is a collection of next generation mobile technologies following 4G. The target capabilities for 5G have been set out by the ITU under the "IMT-2020" designation. The technical standards to achieve these capabilities are currently being developed. 94 5G is typically described as providing for three broad capabilities: a) Enhanced Mobile Broadband (eMBB), which involves delivering greater speed and capacity than is currently available using previous generations of mobile technologies. 5G is expected to deliver typical data download speeds of approximately 100 Mbps. 5G technology offers the prospect of peak data download speed of up to 20 Gigabits per second (Gbps) using high frequency spectrum bands. b) Massive Machine Type Communications (MMTC), which involves enabling mobile networks to manage connectivity with a much larger number of connected devices than was previously possible. This will permit thousands or even millions of connections per base station site, thereby facilitating a much larger number of Internet-connected devices supported across each mobile network. This capability will support the evolution of the Internet of Things, being the connection of everyday objects, devices, tools and machines to the Internet; c) Ultra-Reliable Low Latency Communications, which means that mission critical systems requiring very low latency and very high reliability such as automated factories and autonomous cars can communicate and be managed in near real-time. 95 The technical standards in the RAN for these three principal capabilities, and several others, have been completed by ETSI and 3GPP as part of 3GPP's Release 15. Standards for further capabilities both in the RAN and in the Core Network (5G Core) are expected in 2020 as part of 3GPP's Release 16.

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A.7 Mobile networks in Australia 99 There are currently three mobile networks in operation in Australia, owned by Telstra, Optus and VHA respectively. 100 Each of Telstra, Optus and VHA's existing mobile networks uses 3G and 4G mobile technology. Telstra has announced that it has started rolling out a 5G mobile network with limited geographic coverage. Optus has announced plans for a 5G home broadband service, being a fixed wireless service. 101 Telstra launched its 4G network in 2011, Optus launched its 4G network in 2012 and VHA launched its 4G network in 2013. 102 In order to roll out a 5G mobile network, MNOs will need to deploy new 5G-specific equipment that is capable of using standardised 5G technologies to provide services to 5G-capable devices. 103 Conceivably, a 5G network could be implemented in a number of options as defined by the 3GPP. Two of these options primarily being considered for 5G evolution are: a) a non-standalone or "NSA" network using option 3 defined by the 3GPP: in this type of 5G network, larger elements of an existing 4G network (including the 4G RAN, transmission and core), are required and used to provide a 5G service; and b) a standalone or "SA" network using option 2 defined by the 3GPP: in this type of 5G network, there is no dependency on a 4G network to provide 5G services. 104 The difference between the two primary options currently being considered for NSA and SA networks is shown graphically below by way of an example of a design which can be used to deploy SA option 3 and NSA option 2 networks: 105 In the NSA 5G configuration, the 4G Core Network (Enhanced Packet Core) is upgraded for 5G. The 5G Radio is anchored onto a 4G Radio. The dotted lines represent the control signals for 4G and 5G. The solid lines represent the data traffic carried to/from the mobile device. This configuration is able to use the existing 4G core network to delivery additional data capacity over 5G spectrum bands. 106 In the 5G SA configuration, a new 5G Core Network connects only to 5G base stations for control and data transmissions. The evolution of the 5G core will be used to enable the evolution of 5G services beyond eMBB. 107 The 5G network proposed to be deployed by VHA is an NSA network. The 5G networks currently being deployed by Telstra and Optus are also NSA networks. 108 To deploy a 5G NSA network, an MNO would ordinarily use the same radio base station network equipment vendor as it used for its 4G radio base station network given that the 5G radio base station equipment supplied by Huawei, Ericsson or Nokia (as the case may be) is not compatible with the 4G radio base station network equipment supplied by the other vendors in each case. To use a different 5G radio base station network equipment vendor to the existing 4G network equipment vendor would necessarily involve increased cost and risk given the prospect of technology incompatibilities such as those discussed at paragraph 98 above. 109 There are presently no SA 5G networks in Australia. 110 There is presently no 5G Core equipment available for use in a 5G SA RAN configuration in Australia, and no SA 5G handsets available in Australia.

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APPENDIX A: GLOSSARY Term Definition 1G The first generation of mobile technology developed in the 1970s and 1980s. 2G The second generation of mobile technology developed in the early 1990s. 3G The third generation of mobile technology developed in the late 1990s and early 2000s. 3GPP 3G Partnership Project. 4G The fourth generation of mobile technology developed in the mid-2000s. 5G The fifth generation of mobile technology. 5G is a collection of next generation mobile technologies following 4G. The capabilities for 5G have been set out by the ITU under the "IMT 2020", albeit that the technical standards to achieve some of these capabilities are still being developed. AAU Active Antenna Unit. 4G technologies and 5G mid-band and mmWave band technologies which combine the radio unit and antenna elements into a single radio and antenna package. ACMA Australian Communications and Media Authority. AMPS Advanced Mobile Phone System. A first generation analogue mobile phone system. antenna An antenna is a physical array of conductors, at specific lengths that transform specific frequency ranges of radio waves to/from electric signals. backhaul services Transmission between a base station site and the core network. backhaul transmission network A transmission network, commonly fibre or microwave, which connects the RAN sites to the core network and thereby transmits information between the RAN and the core. base station sites A base station site uses spectrum to communicate with a user's mobile device by transmitting and receiving signals from and to the device, and provides mobile network coverage to mobile devices within that proximate geographic area. Macro RAN sites and small cell sites are two main types of outdoor base station sites. baseband unit (BBU) A unit that processes signals and communicates between the multiple attached radio units on a base station site and the broader network and core network. bps Bits per second capacity The amount of combined data bandwidth a network has to support the volume of voice and data traffic generated by multiple users on a network at defined performance standards. CDMA Code Division Multiple Access, a 2G standard used in the USA and Russia. core network Component of a mobile network which manages voice and/or data traffic, connects and manages the different parts of the network and connects to other networks (including the internet) coverage The geographic locations that a customer's mobile device is able to connect to a base station site in the mobile network, alongside a number of other customers connected to the network in that geographic location. D-AMPS Digital AMPS, a 2G standard used in North America, South America and Korea dark fibre Unused optical fibre cores in optical fibre cable that has been deployed by a third party without optical equipment (to communicate data signals on the fibre) at each end of the fibre. Dark fibre is subsequently "lit up" by a user with the user's own optical equipment, allowing the fibre to be used by that user. data bandwidth The amount of data transferred in a period of time (usually measures in bps). electromagnetic spectrum The range of frequencies used to emit electromagnetic radiation. The electromagnetic spectrum is a continuous range of electromagnetic radiation extending from the longest radio waves through to infra-red, visible light, ultra-violet and X-rays to gamma-rays. ETSI European Telecommunications Standards Institute. Gbps Gigabits per second GSM Global System for Mobile Communications, which is a standard for mobile devices now commonly referred to as "2G". high band Mobile network frequencies above 6 GHz. in-cabinet unit A radio unit that is installed in a cabinet near the base of the structure. interference Unintended radio signals being generated by another source and interfering with another signal. ITU International Telecommunication Union. Kbps Kilobits per second low band In Australia, mobile network frequencies between 700 MHz to 1 GHz. LTE Long Term Evolution, the first technical standard to achieve the capabilities requirement for 4G mobile technology known as "IMT Advanced". macro RAN sites Base station sites that are typically located at a height of 15 to 30 metres above the ground and provide coverage over a large geographic area. They typically carry larger, heavier and higher-powered equipment relative to small cell sites. Massive Machine Type Communications (MMTC) A capability of 5G which involves enabling mobile networks to manage connectivity for a much larger number of connected devices than was previously possible. Massive MIMO Massive MIMO refers to MIMO transmission with a much larger number of antenna units, at this stage typically available from vendors with between 16 and 128 antenna units to transmit signals and the same number of antenna units to receive signals. Mbps Megabits per second. Metro spectrum Spectrum permitted for use in Adelaide, Brisbane, Canberra, Perth, Melbourne and/or Sydney. mid-band Mobile network frequencies between 1 GHz to 6 GHz. MIMO Multiple Input Multiple Output. A radio transmission technique where multiple signals are sent and received from different antennae to created additional data bandwidth. In mobile networks, typically 2-4 antennae are used for MIMO transmission. MNO Mobile network operator. mobile network A mobile network uses spectrum and compatible networks to connect mobile devices and deliver mobile services (such as voice, SMS and mobile data) to those devices. It consists of a RAN, a "backhaul" transmission network and a core network. mobile roaming agreements Agreements between MNOs that allow retail mobile services customers of one MNO to use their mobile device on another MNO's network when outside the coverage area for the mobile network for which they subscribe. MVNO Mobile virtual network operator. NSA network A non-standalone network, which is a type of 5G network that requires an existing 4G network (including the 4G RAN, transmission and core) to provide a 5G service. pole Power pole, lighting pole, traffic pole or utility pole. radio receivers Radio receiver is the receiving function, typically receiving a signal from another transmitter, e.g. a device. radio unit A radio unit includes a Transmitting and Receiving function. May be known as a TRX or RU or Remote RU (RRU). RAN Radio access networks, consisting of mobile cell towers (also known as base station sites or cell sites), associated electronics and antennae on those sites, that communicate with mobile devices over designated RF spectrum and is connected to the transmission network. refarm or redeploy The process of redeploying or reusing spectrum for other purposes (for example, redeploying spectrum from 3G to 4G networks). regional spectrum Spectrum permitted for use in all areas other than Adelaide, Brisbane, Canberra, Perth, Melbourne and Sydney. remote radio unit (RRU) A Radio Unit that is installed on the structure near to the antenna. RF Spectrum Radiofrequency (RF) spectrum. Part of the total electromagnetic spectrum which is used for transmitting radio waves. SA network A standalone network, which is a type of 5G network and core that does not depend on a 4G network to provide 5G services. small cell sites Base station sites that are typically located at a height of 3 to 10 metres above the ground and provide coverage over a smaller geographic area than Macro RAN sites. They typically carry lighter, smaller and less high-powered equipment than macro RAN sites. SMS Short message service (also known as text messaging) - a service provided as a feature of the mobile network (as opposed to a messaging service offered by an "over the top" provider like Apple or Facebook). spectrum See RF Spectrum. spectrum band A frequency range. spectrum bandwidth Range of spectrum frequencies, typically within a particular spectrum band. The greater the range of frequencies of spectrum bandwidth the more information can be sent. spectrum licence Licence from the ACMA to use particular frequencies of spectrum in specific geographic areas as specified in the spectrum licence. spectrum 'lots' A parcel of spectrum bandwidth that is typically identified as the minimum volume of spectrum that can be purchased in a geographic area at spectrum auction. spectrum propagation Behaviours and characteristics of radio waves as they travel through a medium e.g. air, buildings, etc. structure Structures on which equipment deployed on a base station site can be mounted, such as a communications tower or pole, water tower, side of building or rooftop, power pole, lighting pole, traffic pole or utility pole, or other suitable structures. tower Communications tower or pole, or water tower. transmission Transmission services supplied over transmission networks. UHF Ultra-High Frequency, which is a frequency between 300 MHz and 3 GHz. Ultra-Reliable Low Latency Communications A capability of 5G which means that mission critical systems requiring very low latency and very high reliability such as automated factories and autonomous cars systems can communicate and be managed in near real-time. UMTS Universal Mobile Telecommunications System VHF Very High Frequency, which is a frequency between 30 and 300 MHz.

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APPENDIX B: SPECTRUM ILLUSTRATED Source: https://www.acma.gov.au/-/media/Spectrum-Engineering/Image/Spectrum_Illustrated-png.png?la=en

Radiocommunications Act, ss 29, 30, 36, 38, 39, 39A, 46 and Part 3.2
The use of these bands for 5G services is likely to require upgrades to the RAN hardware and/or software. In addition, 5G use would occur once the relevant 5G RAN equipment and handsets supporting these bands are available.
Different generations of mobile technologies are explained in section A.5 below.
In the convention of these tables, "Metro" spectrum is spectrum in Adelaide, Brisbane, Canberra, Perth, Melbourne and Sydney. All other areas are "Regional".
The reference to "2x" before a spectrum allocation, as specified in paragraphs 25 to 28 indicates that the spectrum frequency is allocated in a FDD configuration since FDD spectrum is allocated for 2 separate links - i.e. an uplink and a downlink. For example, Telstra has 2x 20 MHz of 700 MHz spectrum, which represents its 20 MHz of downlink and 20 MHz of uplink spectrum in the 700 MHz band. If there is no "2x" prefix, the spectrum is allocated in a TDD configuration.
See Australian Communications and Media Authority, 700 MHz spectrum - unsold lots auction, April 2017 - Auction guide, p 17 available at https://www.acma.gov.au/-/media/Spectrum-Licensing-Policy/Information/pdf/700-MHz-unsold-lots_Auction-guide-pdf.pdf?la=en
TPG has 1800 MHz spectrum in the following metros: Adelaide and Canberra. See the table of 1800 MHz spectrum lots won by TPG available at https://www.acma.gov.au/theACMA/auction-summary-1800-mhz
TPG has 1800 MHz spectrum in the following regional areas: Darwin, South Queensland, Mackay, Northern NSW, Canberra, Southern NSW, Regional Victoria, Regional South Australia, Tasmania. See the table of 1800 MHz spectrum lots won by TPG available at https://www.acma.gov.au/theACMA/auction-summary-1800-mhz and https://www.acma.gov.au/theACMA/multiband-spectrum-auction-results-winning-prices-and-winning-bidders. In Tasmania, TPG has 2x 15 MHz of 1800 MHz spectrum.
TPG has 2600 MHz spectrum in the following metros: Canberra, Adelaide, Brisbane, Darwin, Hobart, Melbourne, Perth and Sydney. See Australian Communications and Media Authority, Digital dividend auction - Auction Guide, p 28 available at https://www.acma.gov.au/-/media/Spectrum-Licensing-Policy/Information/pdf/Auctionguide-pdf.pdf?la=en
TPG has 2600 MHz in the following regional areas: Regional East Australia, Regional Western Australia and Remote Australia (which covers the rest of Australia but excludes the Mid-West Radio Quiet Zone). See Australian Communications and Media Authority, Digital dividend auction - Auction Guide, p 28 available at https://www.acma.gov.au/-/media/Spectrum-Licensing-Policy/Information/pdf/Auctionguide-pdf.pdf?la=en
Mobile JVA, clause 6.2.
Mobile JVA, clause 3.2.
ACMA Five-Year Spectrum Outlook 2018-22, page 61.
There is no theoretical upper limit with respect to the number of antenna units in a massive MIMO AAU. Additional antenna units add to the size and weight of an AAU and additional antenna units in an AAU provide diminishing returns in terms of benefits to the base station site. Therefore, there are practical limitations to the number of antenna units that can be included in a massive MIMO AAU.

At a glance

Court

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Before

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Judgment (141 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (19)

Cited By (2)