COVID-19 makes tough start for combined TPG

The company once known as Vodafone Hutchinson Australia has copped a hefty COVID-19-related hit in its first results as a combined entity.

TPG CEO Inaki Berroeta is facing a tough start for the one-time Vodafone’s newly merged operations. Photographer: Adam Yip

The company formerly known as Vodafone Hutchinson Australia, TPG, was hit hard by COVID-19 restrictions, with the company on Friday detailing the full extent of the economic damage wreaked by the pandemic.

Vodafone had never posted a profit, and in its first set of results under the TPG moniker its revenues for the year ending June 30 were down 12 per cent year-on-year to $1.513bn, and it recorded a net loss after tax of $117m.

Reported earnings before interest, taxation, depreciation and amortisation fell 8 per cent to $546m, with the company hit by an 80 per cent decrease in margin from international roaming, and a 30 per cent decline in prepaid connections.

The two telcos merged just four days before the end of the financial year.

Chief executive Iñaki Berroeta told The Weekend Australian TPG had been hit by retail store closures and reduced contact centre operations, as well as generous customer support measures including free unlimited calls and SMS, and bonus data.

He said he anticipated some of the challenges to continue for the rest of the year.

“I think we are still a more resilient industry during these times because of the dependency that people have on our infrastructure, and most people are working remotely,” he said in an interview.

“On the other hand, the impact it’s had on our business, because no visitors are coming to Australia and the impact on people traditionally using our services, like students and people on working holiday visas ... That impact is not going away any time soon, but in the meantime there’s a great opportunity to continue building our 5G network.”

Mr Berroeta added that the company’s financial pain was not entirely due to the pandemic, joining the chorus of telco executives who have called for a rethink on NBN pricing.

“Customer needs are rapidly increasing, especially during COVID,” he said. “We cannot have an NBN pricing that is so unpredictable around the costs of these products. The CVC model was probably good at the time it was designed, 10 years ago, but it is absolutely out of date today.

“A 12 megabit per second broadband connection has a wholesale cost of almost $40, that is something that as an industry we need to find a solution for.”

The company‘s mobile business was also struggling before the pandemic, with postpaid mobile customers falling 2 per cent to 3.4 million. Prepaid customer numbers fell 10 per cent, to 1.8 million. The company’s Vodafone and Lebara brands are popular with international students.

The executive added the company had made a “strong start” on merger integration activities, upgrading both its fibre and mobile services.

“It‘s exciting,” he said. ”I really like my job, and I have profoundly enjoyed getting together with the team of the former TPG, and being able to better understand all the capabilities we have combined. We have very qualified experts across the business and to bring everything together has been extremely exciting, I feel very privileged and excited by the opportunities.”

TPG shares closed up 20c, or 2.7 per cent, on Friday at $7.50 each.

Last week, Telstra shares plummeted by more than 8 per cent after its annual profit fell 15.6 per cent, to $1.8bn.