TPG to streamline product offerings after profit slump

TPG will spend the next four years slimming down its portfolio of products from 6000 to just 100 after reporting a slump in profits for the first six months of the year.

TPG Telecom will spend the next four years decreasing a 6000-product offering by more than 60 times in a bid to make $147m in cash available.

The nation’s third-largest telco on Thursday detailed its plan to “eliminate duplicates, not brands” as it looked to “simplify” its offering to just 100 products in the company’s half-year results.

Despite TPG signalling it would not appeal against the decision to block its $1.8bn network-sharing deal with Telstra, the company’s chief executive remains upbeat on the idea.

What TPG learned from that, Inaki Berroeta told The Australian, was that regulators agree the best way to service regional areas was through network ­sharing.

“But at the same time, the tribunal said it was a finely balanced decision in the sense they really didn’t see any problem with infrastructure sharing as a way to better serve regional customers,” he said.

“In areas where there is a small population or a small density of people, it is much better to combine the financial resources into expanding the network than create duplication. Duplication makes sense in areas where there are a lot of people because it offers more capacity.”

Network-sharing deals, simplification of brands and the ­“potential monetisation” of infrastructure assets were the company’s top three priorities in a bid to create a “leaner, more focused TPG”.

In its results, TPG reported a profit slump of 71 per cent in the first six months of this year, recording $48m in net profit after tax. That was down from $167m over the same period last year, as the telco reported higher spending on technology costs, employee benefits and operating expenses. That profit slump related to a one-off tax benefit in relation to the sale of some of the company’s mobile towers.

The company reported service revenue of $2.3bn in its half-year results, which represented 4.5 per cent growth compared to the same period last year.

Earnings before interest, tax, depreciation and amortisation was $941m, representing growth of 12.4 per cent. The telco is targeting EBITDA of $1.92bn-$1.95bn for the rest of the financial year.

TPG shares rose 2.2 per cent to $5.55 on Thursday.

E&P analyst Entcho Raykovski said TPG results were largely in line with market estimates despite high capital expenses.

“This is a solid result and, while capex guidance is higher, on balance we’d expect the stock to trade ahead of the market today,” he said.

About 39,000 new subscribers bought a mobile service from TPG in the first six months of this year, with the company reporting 5.32 million mobile customers. Postpaid revenue per user rose 6.2 per cent to about $44.60 a month after the company increased mobile phone plans earlier this year. Average mobile revenue was $33 per user, up 2.8 per cent.

Similarly to Telstra in its results last week, TPG attributed much of its growth in mobile subscribers to the return of international travellers.

TPG recorded a drop in the number of fixed-based customers by 43,000, with a fixed customer base of 2.18 million.

However the telco experienced about 22 per cent growth in its fixed wireless services.

TPG will pay shareholders an interim dividend of 9c a share, fully franked, on October 11.