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TPG Telecom weathers revenue decline in first financials since merger

TPG Telecom weathers revenue decline in first financials since merger

CEO Iñaki Berroeta said the six months ending 30 June was an unprecedented and complex period.

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TPG Telecom Group CEO, Iñaki Berroeta

TPG Telecom Group CEO, Iñaki Berroeta

Credit: Vodafone

TPG Telecom, the new publicly-listed entity combining Vodafone Hutchison Australia and TPG, has flagged year-on-year declines in revenue and earnings for the six months ending 30 June. 

It should be noted, however, that the group’s statutory income statement for its first half includes a full six months results of the company formerly known as Vodafone Hutchison Australia (VHA) but only four days from TPG Corporation (the company formerly known as TPG Telecom).

As such, the latest results are more indicative of VHA’s performance over the half year rather than that of the pre-merger TPG. 

Indeed, the group’s statutory balance sheet at 30 June 2020 includes TPG Corporation’s assets and liabilities but is not fully reflective of the group’s balance sheet upon the implementation of its $15 billion merger due to “significant restructuring steps” that occurred between 30 June 2020 and the merger implementation date.

Regardless, the company now known as TPG Telecom reported an 11 per cent decrease in revenue for the six month period, compared to the corresponding period the year prior, to $1.54 billion — this figure includes a four-day contribution of $27 million from TPG Corporation. 

Excluding the TPG Corporation contribution, revenue decreased by 12 per cent to $1.51 billion.

Reported pre-tax earnings (EBITDA), meanwhile, decreased by 9 per cent to $531 million, again including a four-day EBITDA contribution of $9 million from TPG Corporation, along with $24 million of merger transaction costs. 

Excluding these items, the underlying TPG Telecom standalone EBITDA decreased 8 per cent to $546 million for the period. 

At the same time, reported net after-tax profit (NPAT) came in at $83 million, including a one-off, non-cash credit to tax expense of $226 million and one-off merger and other costs of $30 million.  

Excluding those one-off items and TPG Corporation’s contribution of $4 million, the underlying TPG Telecom (i.e. the former VHA) standalone net loss after tax (NLAT) improved by 19 per cent to $117 million.

According to TPG Telecom CEO (formerly VHA’s CEO) Iñaki Berroeta said that the six months ending 30 June was an unprecedented and complex period, with the company managing four significant sets of challenges and priorities.

“We simultaneously supported our customers to help keep them connected through COVID, moderated the financial impacts of the pandemic on our own business, completed the merger and commenced our 5G roll-out after an 18-month delay due to the vendor restrictions,” Berroeta said.

“While our results reflect a negative impact from COVID on the mobile sector, they also demonstrate the relative resilience of the industry and our capacity to continue to deliver the essential services which our customers rely on,” he added. 

Indeed, a number of factors resulting from the impacts of the ongoing COVID-19 pandemic hit the company’s revenue and earnings before interest, tax, depreciation and amortisation (EBITDA). 

These included a roughly 80 per cent decrease in margin from roaming and a 30 per cent fall in prepaid connections, along with a 20 per cent decrease in postpaid connections. 

It also saw temporarily reduced sales channel operations, including retail store closures due to shut-down and precautionary measures, reduced contact centre operations in March and April due to Indian lockdowns, and customer financial hardship and support initiatives. 

However, customer demand for telecommunications services remains strong, driven by increased customer reliance for remote working and education arrangements. 

This was apparent in the Vodafone National Broadband Network (NBN) customer base, which increased 32 per cent since 31 December 2019 to 150,000. At the same time, TPG Corporation fixed broadband subscribers increased 2 per cent to a nudge over 1.97 million. 

“In the June 2020 quarter, our group achieved the highest market share of net NBN growth of any service provider, with one third of new NBN subscribers for that quarter taking a TPG Telecom Group branded service,” Berroeta said.

Making good on merger

While the company has been working to adjust to shifting market demands during the ongoing pandemic, it claims to have made a strong start on merger integration activities, with 445 network upgrades performed since implementation.

The company claims that more than 1.8 million Australians have benefited from improved network performance following the integration of TPG Corporation spectrum into the Vodafone mobile network at 318 sites in Canberra, Tasmania, Southern Queensland, Darwin, Adelaide, regional Victoria, regional South Australia and parts of NSW. 

Network performance has also been boosted in the Melbourne CBD and parts of Sydney where TPG Corporation small cells have been activated and 700 MHz spectrum added to sites, according to the company. 

“Customers began experiencing the benefits of the merger from day one, and over the past six weeks, we have delivered significant boosts to data speeds and performance for customers from these deployments,” Berroeta said.

The company has also commenced a program to connect TPG Corporation fibre to an additional 700 sites on the Vodafone mobile network, building on a 2015 commercial agreement that saw TPG Corporation fibre connected to more than 3,000 Vodafone mobile sites. 

Moreover, from 24 August, iiNet will begin inviting its existing mobile customers to migrate to the Vodafone mobile network, resulting in savings from third-party network costs.

“By using our own mobile network, we’ll be able offer customers more inclusions for less, with new customers to receive 50 per cent off their plans for six months and existing migrating customers to receive two months’free access,” Berroeta said.

Meanwhile, the combined company’s 5G Vodafone mobile network is planned to reach more than 85 per cent of the population in Australia’s top six cities of Sydney, Melbourne, Brisbane, Adelaide, Perth and Canberra by the end of 2021.

The company’s 5G rollout, which commenced in March 2020, will enter a new phase in the second half, with deployments to increase over coming months.

According to Berroeta, 5G is one of TPG Telecom’s key company priorities, and it has more than 1,200 sites currently in planning.

“5G device penetration in Australia remains low but as more 5G-enabled devices come into the market, we are increasing the number of sites going live,” he said. 

Looking forward, TPG Telecom Group plans to continue prioritising activities to realise “merger synergies”, while responding to the ongoing COVID-19 pandemic.

Top priorities include accelerating the company’s 5G mobile network, growing market share of households by offering converged products, owned infrastructure broadband opportunities, increasing enterprise market share, organisational integration activities, and efficiencies across the business. 

“Through our increased scale and strength as a merged company, we are well-placed to continue to support customer needs, while progressing our plans to deliver the benefits of the merger for customers and shareholders,” Berroeta said.


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