Competition watchdog cites rural harm in Telstra-TPG merger veto

The deal would have seen TPG share Telstra's rural mobile phone tower network, in exchange for leasing its the low- and mid-band spectrums to Telstra, which the telco says would improve coverage and capacity on increasingly congested regional networks.

However, the Australian Competition and Consumer Commission found under the agreement regional customers would face "higher prices and reduced quality and coverage".

If approved, TPG would decommission 725 of its regional telecommunications towers in major centres including Tamworth, Gladstone, Shepparton, and Whyalla.

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ACCC Commissioner Liza Carver said although there were short-term benefits in improved TPG network coverage and cost savings for both telcos, the deal would likely lead to less competition in the longer term and leave Australian mobile users worse off over time.

"The enduring and more substantial impact of the proposed arrangements would be to lessen infrastructure-based competition which would make consumers, including those in regional areas, worse off over time," Ms Carver said.

"Mobile networks are of critical importance to many aspects of our lives, including our livelihood and our wellbeing. Any reduction in competition will have very wide-ranging impacts on customers, including higher prices and reduced quality and coverage.

"Entering into the arrangements proposed by Telstra and TPG will represent a significant change to the structure of the market that would have long-term consequences."

The chair of Commpete, an industry group representing smaller telcos and mobile network operators, Michelle Lim said had it been ushered through, the deal would have been another lever entrenching Telstra's dominance in regional communications.

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"It would have meant decisions over pricing, service availability and service standards are subject to the whims of a single private enterprise, without regulatory guardrails to guarantee value, flexibility and choice for an increasingly essential service," Ms Lim said.

"The proposal was primarily a commercial arrangement between two parties, and wasn't the right one for competition.

"Many of the public benefits were theoretical and unquantified... and would discourage the development of alternative infrastructure in regional areas by existing and emerging players."

Telstra chief executive Vicki Brady said the competition regulator's decision was extremely disappointing and the company would appeal the result.

"This decision is a massive missed opportunity for the people, business and communities of regional Australia," Ms Brady said.