TPG ramping up NBN alternatives

Facing falling revenues and profits, the telco is shifting attention to its non-NBN solutions for customers.

TPG CEO Iñaki Berroeta. Picture: Adam Yip

TPG says its NBN alternatives are growing apace, with the telco posting a slight drop in revenue and profit as it fights off Covid and NBN-related headwinds, and eyes a major infrastructure sell-off.

In its half-year FY21 results on Friday – one full year after its $15bn merger with Vodafone – TPG lifted its revenue 61 per cent year-on-year to $2.63bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) were up 67 per cent to $886m, given the prior year’s results only counted four days’ contribution from TPG.

On a pro forma basis, if the merger had been effective throughout the prior financial year, revenue was down 3 per cent from $2.71bn and EBITDA down 3 per cent from $918m.

Its shares had slipped down 1.66 per cent to $6.50 at 3pm AEST.

“The group’s EBITDA result is pleasing and demonstrates a solid underlying performance achieved through the realisation of $38m in merger cost synergies and strong commercial management,” CEO Iñaki Berroeta told investors.

“In an environment with continued headwinds from COVID-19, NBN margin erosion and the new RBS levy, and residual challenges from the merger delay and 5G vendor restrictions, we are performing well,” he said.

Mr Berroeta said the company’s NBN alternatives were performing strongly, with its 4G home wireless customer base more than tripling in the six months of 2021.

With NBN pricing under pressure, Australia’s telcos have been incentivised to find other options to offer customers.

“We have had a strong start in bringing more customers onto our own infrastructure, while maintaining a strong NBN market share,” Mr Berroeta told analysts and media on an earnings call.

“Following a strong strategy in the first half, we continue to see rapid growth, with 17,000 home wireless net apps in the first six weeks on the second half. This has been boosted by the launch of home wireless under the TPG brand just last month.”

In April, telcos including TPG hit out at NBN’s proposed new pricing model, which include a new soft cap on variable data-capacity charges, as well as what it described as more generous data inclusions and a progress of long-term pricing reform.

TPG Telecom group executive legal and external affairs, Trent Czinner, said then that the proposals didn’t go far enough.

“The CVC [Connectivity Virtual Circuit] is ultimately a tax on speed for consumers,” he said. “Instead of simplifying the pricing model and moving away from the outdated CVC, it adds more complexity and further entrenches the CVC.

“We’re concerned the CVC soft-cap threshold is designed to discourage competition. Working from home, video and other consumer trends mean the CVC isn’t fit-for-purpose and should be replaced with a flat pricing model.”

On Friday TPG said it was on track to reach 85 per cent 5G population coverage in ten of Australia’s largest cities and regions by the end of the year.

The company’s postpaid mobile subscribers fell by 3.4 per cent in six months to end the period at 1.91 million, and Mr Berroeta said he was confident the mobile business, which had been impacted by factors including Covid restrictions, would return to growth when Australian borders reopened and the 5G network reached scale in the major cities.

Hot off the heels of Telstra’s blockbuster $2.8bn towers sale – in which the telco will sell 49 per cent of that business to a consortium including the Future Fund – TPG has flagged a strategic review of its tower assets. The company operates a mobile network of 5800 rooftops and towers.

“Demand for telecommunications infrastructure assets is strong, and TPG Telecom has commenced this review to obtain a preliminary market assessment,” the telco said in a statement. “While the company is continually seeking opportunities to maximise shareholder value, it has not made any commitment in relation to these assets.”

It will pay a fully franked dividend of 8c per share on October 13.