TPG Telecom faced a challenging first half of 2024, with interim profits plunging by 40% to AUD 29 million, down from AUD 48 million in the same period last year. This steep decline was driven by increased depreciation, amortization expenses, and higher financing costs resulting from recent investments in network infrastructure and technology upgrades.
Despite the profit dip, TPG Telecom achieved a 1.7% increase in service revenue, reaching AUD 2.33 billion, fuelled by strong growth in its mobile segment. Mobile service revenue surged by 7.2%, contributing AUD 1.12 billion, which helped offset a 3.5% decrease in fixed service revenue.
The company’s gross margin also improved by 3.9%, reflecting the success of higher-margin fixed wireless products, despite the intense competition in the NBN market.
Subscriber Trends and Their Impact
The subscriber trends from H1FY22 to H1FY24 play a significant role in understanding TPG Telecom’s financial performance. In the Mobile Prepaid segment, TPG saw consistent growth, with the subscriber base expanding from approximately 1.8 million in H1FY22 to nearly 2.2 million in H1FY24.
This growth indicates the company’s success in attracting and retaining customers with its value-driven prepaid offerings.
In contrast, the Mobile Post-paid segment experienced modest growth, with subscribers increasing slightly from around 2.89 million in H1FY22 to 2.92 million in H1FY24.
This stability in the post-paid segment is essential for maintaining recurring revenue streams, though it suggests that TPG might need to innovate further to stimulate more significant growth in this area.
A particularly noteworthy development is the dramatic increase in MVNO (Mobile Virtual Network Operators) subscribers in H1FY24.
After a period of stagnation, the MVNO segment surged, adding nearly 100,000 new subscribers, a move likely driven by strategic partnerships or new market initiatives. This spike has contributed to the overall positive momentum in TPG’s mobile segment.
On the Fixed (overall) side, however, the subscriber base has gradually declined, dropping from 2.2 million in H1FY22 to around 2.1 million in H1FY24.
This decline, combined with competitive pressures in the NBN market, highlights the challenges TPG faces in this segment.
Nonetheless, the company’s focus on expanding its fixed wireless offerings has helped mitigate some of these challenges, as evidenced by the increase in ARPU for fixed services.
TPG Response To Results
Chief Executive Officer and Managing Director, Iñaki Berroeta, emphasized TPG’s strategic focus, stating, "The continued growth in our Mobile business reflects our focus on offering simple, great value plans in an environment of growing demand, despite slowing subscriber growth. In Fixed, our ongoing success in rolling out our Fixed Wireless products is offsetting the impact of intense competition in the NBN market."
Looking ahead, TPG Telecom remains optimistic about achieving its full-year EBITDA guidance of AUD 1.95-2.025 billion. The company's focus on stabilizing capital expenditures, enhancing operational efficiency, and expanding its network through strategic partnerships like the regional network sharing agreement with Optus will be key drivers of future success.
This agreement is set to extend TPG's 4G and 5G coverage to 98.4% of the Australian population, a move that strategically positions the company for long-term growth and competitiveness in the market.
Chief Executive Officer Iñaki Berroeta emphasized TPG’s strategic direction, stating, "We are focused on strategy delivery as we look to progress our proposed regional network sharing arrangement with Optus, complete the strategic review of our fibre infrastructure assets, and prepare to start delivering customer benefits of business simplification in FY25."
These efforts align with TPG’s broader goal of enhancing operational efficiency and expanding its market presence, particularly as the company navigates the rapidly evolving telecommunications landscape.
However, these growth strategies come amid challenging decisions, including the recent announcement of 120 job cuts. This reduction in workforce is part of TPG’s ongoing efforts to streamline operations and mitigate the impact of sustained inflation.
The company aims to deliver a flatter operating cost profile heading into FY25, which is crucial for maintaining financial stability and supporting future investments in network expansion and technology upgrades.
Additionally, TPG Telecom declared an interim dividend of 9.0 cents per share, consistent with the previous year, though with 87% franking due to the full utilization of historical franking credits. This decision reflects the company’s commitment to returning value to shareholders, even as it manages the complexities of operational restructuring and market competition.
