TPG faces NBN headwinds as mobile presence builds

TPG faces NBN headwinds as mobile presence builds

Highlights growing need for mobile network development

TPG (ASX:TPM) has told its shareholders that although it anticipates solid growth in 2018, it expects its performance over the coming year to be offset by National Broadband Network (NBN) margin headwinds.

“The fixed-line residential broadband margin erosion faced by the industry in light of the NBN underlines the importance of TPG’s strategy to take advantage of the valuable assets it has assembled to inject itself into the industry’s mobile sector, vastly expanding the addressable revenue pool for the group into the future,” the company told shareholders," the company told shareholders in its annual financial report, released on 19 September.

The fixed-line headwinds come as the telco also reveals that it has made strong progress in the implementation of its mobile network rollouts in both Singapore and Australia - a relatively new development for the company, which has traditionally been focused on the fixed-line market.

In Australia, TPG has entered into agreements with “multiple partners” to gain access to a large volume of sites to provide coverage of major metropolitan areas. Implementation of some initial site clusters in Sydney, Melbourne and Canberra is expected to be complete by mid-2018, the company told shareholders.

Overall, the Australian telecommunications and internet services provider posted $2.49 billion revenue for the year ended 31 July 2017.

The result represents a four per cent increase from the previous year, when the company posted $2.4 billion.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by five per cent to $890.8 million, with the underlying EBITDA for FY17 of $835 million.

Net profit after tax attributable to shareholders (NPAT) for the period was $413.8 million, an increase of nine per cent compared to the previous year.

The underlying NPAT grew by 16 per cent in 2017 to $417.3 million due, primarily; to the EBITDA growth plus a $32.4 million pre-tax decrease in net financing costs due to a reduction in the quantum and cost of the group’s bank debt.

Following the integration of iiNet’s operations during the year, iiNet’s results are now reported within the TPG’s Corporate and Consumer segments. TPG acquired iiNet in August 2015 for $1.4 billion.

The Consumer segment underlying EBITDA grew by $49.7 million, driven by an extra three weeks’ contribution from iiNet relative to FY16 and organic growth of $35.9 million driven by NBN and FTTB subscriber growth and the continued realisation of financial benefits from iiNet integration activities.

The Corporate segment posted EBITDA of $312.8 million compared to $300.2 million for the previous year, representing growth of $12.6 million driven by continued data and internet sales and margin expansion.

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