Optus is spending $1 billion to build 500 new mobile base stations around regional Australia, allowing it to compete better against Telstra and Vodafone. 

The money will be spent within one year and includes upgrading 1,800 existing 3G sites to 4G technology. The $1 billion spend includes the cost of spectrum licences in regional areas and 114 towers built with funding from the federal government's Mobile Black Spots Program (MBSP). 

"This represents one of the single largest investments in regional mobile infrastructure in Australia's history," Optus chief executive Allen Lew said on Friday. 

"This investment, plus the investment we are doing in metropolitan areas, will allow us to match Telstra... based on our study of consumer travel patterns, where they live, where they work, and [their] business requirements," he told Fairfax Media. 

The business case for Singtel, Optus' parent company, for investing in regional Australia is based on increasing market share among consumers, government and enterprise, and increasing average revenue per user (ARPU). However, it won't raise prices to Telstra's levels straight away.  

"We have changed the game. Obviously, when we talk about market share in regional areas, you know who we are after...[But] if we want to unseat [Telstra] we cannot price at their levels because we don't have that same track record. I think in the short term we will continue the price where we are."

Optus is placing mobile towers where its potential consumers live, work, holiday, and travel, rather than targeting specific geographic locations, he explained. 

"We have done this and aggregated it across the whole country and we use that to build up our network," Mr Lew said. 

Towers built under the MBSP and satellite-backed small cells will create entirely new coverage, but the bulk of the 500 towers will extend Optus's existing footprint.  

The competition watchdog recently made a draft decision to not declare regional mobile networks as share infrastructure, which means Optus will not be forced to sell access to competitors. 

Both Telstra and Optus argued publicly to the Australian Competition and Consumer Commission they were unlikely to keep investing in regional areas if they were going to be forced to grant competitors access at regulated prices. 

Mr Lew said the $1 billion was a "committed spend" and Optus is confident policy settings for regional mobile will not change. 

"We are very confident that with the policies that are in place today, we will be able to make the kind of returns in regional Australia that our shareholders will require." 

Meanwhile Vodafone's chief strategy officer, Dan Lloyd, who led the argument in favour of roaming, said an extra 500 towers will not match Telstra's mobile footprint, which was "built largely with taxpayer subsidies, is 1.4 million kilometres and growing through continued government funding".

He also questioned how Optus could build 500 new sites within a year. Vodafone recently released economic research that declared roaming would save consumers $650 million annually by unlocking Telstra's regional network and forcing prices down across the board. 

But Mr Lew said Optus has contractors and technicians lined up ready to complete the expansion, and has already purchased a large number of the sites it will need, which is often a difficult and bureaucratic process.

Asked if Optus is worried about the new competitive threat of TPG, Mr Lew was in turn sceptical of TPG's ability to get a new mobile network up and running.

"TPG has talked a lot. Let's see what they do and then we can talk about whether I am scared of them," he said.

TPG is also currently rolling out a mobile network in Singapore, where Singtel is the incumbent player with 4.1 million services in operation in a country of 5.6 million residents.

A Telstra spokesman said it will continue to invest to "maintain network leadership on coverage, speed and reliability".

"Importantly, this is what happens when we rely on competition to deliver outcomes and not regulation," he added. 

Mr Lew made Friday's announcement in Tamworth, New South Wales, where Optus will build 16 new mobile towers, of which nine are shared with either Telstra or Vodafone. But the bulk of the 500 new sites will not be shared.  

'Rising to the challenge'

Deputy Prime Minister Barnaby Joyce, whose electorate includes Tamworth, gave Optus' announcement a ringing endorsement.

"Optus is rising to challenge," he said on Friday.

"It is there ready to compete with Telstra and compete with Vodafone. It's not just letting one person get ahead. It is going to make sure that, not only have you got the service, you have the competition and market place to make sure you get the best price so you are not held over a barrel."

"And ultimately the statement will be made, 'which mobile phone will I carry that I can rely on in regional Australia to get me from one capital city to another without dropping out'? Because that's the sort of carrier I want to be with."

Mr Joyce also defended the government's mobile blackspots program, which was criticised in an audit for poor selection criteria and favouring marginal coalition electorates.

"Pork-barrelling? That's otherwise called being a good local member," Mr Joyce said. 

Marketing advantage

During the debate about regional roaming Telstra confirmed it invested in regional areas not because each tower is commercially viable, but because it gives them an overall marketing advantage. Analysts estimate this network advantage allows Telstra to charge about 15 per cent more than other telcos. 

Optus currently has exclusive rights in Australia to content like the English Premier League football. However, consumers are likely to subscribe to content like this if they have access to a reliable mobile network capable of streaming video without interruption. 

Mr Lew said the update will ensure videos start within 1.5 seconds of users pushing 'play' on Optus' network "because today 56 per cent of the time when people are on the mobile phone they are using it for video".

Meanwhile, there are no plans to snap up more local content. Optus is just an "interested observer" of Australia's media industry and potential relaxation of media ownership laws, rather than an active participant, he said.