TPG expects ‘margin headwinds’ until NBN roll-out completes

TPG expects ‘margin headwinds’ until NBN roll-out completes

Remains hopeful for Vodafone merger despite ACCC opposition

Credit: NBN Co

TPG has signalled its business will face “headwinds” for the next two years until the National Broadband Network (NBN) is finally rolled out.

The telecommunications has struggled through a difficult year which culminated in a profit decline of 56 per cent to $174 million earlier this year.

In an address at TPG’s annual general meeting, CEO David Teoh said the NBN’s roll-out had led to $76 million in “profit headwinds” for the telco which are set to continue until network’s completion. 

However, he claimed TPG’s “lean” cost structure would spur growth future growth, alongside its move into the mobile network market in Singapore. 

This drive towards a leaner cost structure saw TPG cut 280 jobs this year, reducing its headcount by 6 per cent to 4776 employees.

Teoh also jumped on the bandwagon of RSPs criticising NBN Co’s push into the enterprise broadband space, following on from Telstra chairman John Mullen’s comments that the move was “inequitable”.

“We do have concerns about NBN’s increasing involvement in the business market in areas where there is already substantial existing fibre from numerous competitive carriers,” he said. “We don’t understand why taxpayer funds would be used to overbuild existing infrastructure in these areas.”

TPG Telecom's profit for 2019 took a t hit, plummeting from $396 million in 2018 down to $174 million for the year ended 31 July 2019.

Teoh also addressed TPG’s “difficulties” in 2019, which included the federal government’s decision to prohibit the use of Huawei equipment in 5G networks.

This subsequently led to TPG Telecom scrapping the roll-out of its mobile network in Australia.

"A key feature of our innovative mobile network design that we had been rolling out in Australia was its simple upgrade path to 5G using Huawei equipment,” Teoh said. “With that upgrade path blocked and no suitable alternative technical solution available, it made no commercial sense to continue to invest shareholder funds in a network that could not be upgraded to 5G.”

Meanwhile in May, the Australian Competition and Consumer Commission (ACCC) decided to oppose a proposed $15 billion merger between TPG and Vodafone Hutchison Australia (VHA).

TPG has since undergone a lengthy court battle to try and merge with Vodafone, arguing in Federal Court the decision harmed competition. 

The proceedings were heard in September and the Court expects to deliver a judgment by February 2020.  

“We remain hopeful that the merger will be permitted to proceed,” Teoh added.

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