TPG Telecom Feb FY 23 Results
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TPG Telecom reported its FY23 results, with revenue growing slightly to $5.41 billion despite challenges. Mobile customers increased by 300,000 due to customers switching from Optus after a data breach. Fiber broadband users doubled to 170,000 as TPG positions itself as a lower-cost provider by leveraging its mobile and fiber infrastructure. The merger with Vodafone has created Australia's fourth largest telco, though integrating the companies remains a challenge. Analysts project the stock price could rise further given growth in mobile, fiber, and enterprise customers.
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TPG Telecom Feb FY 23 Results
- 1. Updated: Mar 2023 TPG Telecom - FY23 Results
- 2. General High Low Revenue Volatility High Hazardous Rollercoaster Stagnant Low 5 Year Annualised Growth TPG Attributes (Fin. Year – Dec End) FY 19 FY 20 FY 21 FY 22 Revenue in Billions by (Size) 2.48 4.36 5.3 5.41 Profit in Billions (NPAT) 0.42 0.74 0.110 0.513 Growth (CAGR% 4 years) 21.5% Share of Economy (%) 0.35% 0.41% • The merger of TPG and Vodafone has created a 4th pillar of the Australian Market. • It is positioning itself as a low-cost model by leveraging Mobile Assets, NBNs infrastructure and its own Fibre (FTTB and G.Fast). • Doubled FW (5G) users to Bypass NBN to increase the margin • FW is cannibalising NBN and ADSL subscribers, (new trend). • Launched MVNO to compete with Amaysim (Optus) • Mobile has added net 300K customers, the majority of 65K Optus (hack impacted) moved here, and Telstra added >10K, but is expensive in comparison. Besides roaming has assisted in driving revenue. Mobile has grown in line with industry expectations. • ARPU increased by 2% to $32.4 • It has embarked on a business transformation journey to simplify CX and product choices, underpinned by IT Transformation, where 600+ systems are reduced to 400, increasing the Cloud footprint from 15% to 60% and Consolidating Technology Centres from 42 to 30. IT Costs have increased by 1.4% to 263 Mn. • IT & 5G Transformation is about 1-1.105 % CapEx • ITs contact centre platforms have been rationalised, its payment gateways have been streamlined from three down to one, and 11 legacy IT systems have been decommissioned. • Leader in EE (SD Wan Play) and positioning G.fast (10G B/W) for its own fibre upgrade. • TPG Telecom to sell Vision Network (FTTB ntwk) via auction to Uniti and Vocus. Challenges : Merger Synergies • $125 - $150 Mn in synergies on track for 2022 Mobile Towers • The multi-operator core network (MOCN) sharing deal with Telstra for 10 years, will give TPG access to around 3700 Telstra cellular towers in regional Australia and on urban fringes. Rejected by ACCC, its under appeal in the AC Tribunal. Source: TPG, IBIS, NBN Co, AFR, Gov.au TPG Today – Feb 23 Post Merger – FY22 Blue Chip
- 3. General TPG Today – Feb 23 E&G – FY22 Key Message • EE, FW, and Fast Fibre are driving the growth in E&G. • TPG is leading the EE segment. • TPG and ABB (in SMB) are giving grief to the Telstra Enterprise DAC segment. DAC is declining because NBN EE and Business Fire Zone are waning Tfibre. • Hungary Jack’s contract is a good win with a lot of upsell opportunities. • Mobile has added a net of 300K customers. • FW users have increased from 80K to 170K. • Long-term mobile contacts (36 mths) are impacting all telecom operators, esp. in terms of inventory turnover, margin erosion and NWC. TPG is using consumer finance to overcome ITO challenges. • TPG has benefited from the Optus data hack. Declined to give numbers on add-ons. • Note on - HPS as Partner and Competitor • AWS local Zone in Perth. Brisbane and Adelaide in future (Reacting to MSFT Telstra Partnership) • Private LTE (5G) is where TPG is partnering with AWS. • Mobile Private Network is in-house and exploring how to take this to GTM.
- 4. General Source: TPG TPG Today – Feb 23 Segment Performance
- 5. General TPG Today – Feb 23 HY22 – Market Response Key Indicators • Market Cap – 9.21 Bn • P/B – 0.8 • P/E (Trailing) – 27.88(Growth) • P/E (Forward) – ? (Growth) • Rev (FY 22) - $5.41 Bn • Income (FY 22) – 0.513 Bn Why Stock is rising and can go up to $5.28 (Bloomberg is giving $5.60) • TPG Telecom shares are trading at $5.02, increasing by 5% from $4.79 on Feb 27. • The critical reasons for the growth are • Growth in Mobile because of upcoming price rises to address inflation and roaming. • Growth in FW to bypass NBN magnifies the margin. • Growth in E&G supplemented by Fibre Fast and EE. • The expected sale of wholesale arm Vision stream before Jun 2023. • Jun ending half of each year has more sales (skewed) compared to Dec because of the end of the local financial year. • The multi-operator core network (MOCN) sharing deal with Telstra for 10 years is not considered in the FCF projection. Stock will rise further if that is approved. Source: AFR, Motley.com, TPG, UBS 7.30 (2.03) 5.28 Market Up/Down Intrinsic Market Value vs Intrinsic Value
- 6. General TPG Today – Feb 23 DCF Valuation of Stock Price Source: AFR, Motley.com, TPG, UBS Key Message • FCF projections with baseline assumption give an intrinsic value of $5.28 which is currently higher than $5.02. Hence, it’s a good buy. • With 18c DPS it’s a superior stock than other telecom operators. • P/E 28 and CAGR at 21.5% signify the same sentiment • Stock Recommendation is to Hold or Buy. • .
Notas do Editor
- TPG Telecom shares plunged 11 per cent to $5.87 after the combined Vodafone Australia and TPG Telecom group missed analysts’ forecasts for sales and EBITDA over the six months to June 30. UBS analysts also warned its average revenue per user for mobile subscribers of $31.80 missed expectations in finishing up 1 per cent. Total net mobile subscribers increased by 135,000 over the half. UBS also flagged cost pressures from electricity and marketing as impacting the result. The broker said positives included the 9¢ interim dividend and net mobile subscriber additions. Result Highlights 1H Revenue rose 46% to $1.3bn EBITDA was -$477m, improving 65% v. 1H/18 1H CAPEX spend was $2.9bn, up 2% from 1H/18, which focused primarily on the HFC, FttC & FttN network roll-outs. ARPU rose $1 to $45 Ready to Connect premises were 8.1m (up 32%), with active services reaching 4.7m, up 38%, (of which FttC were ~300k). As of January, 57% of activations are on 50mbps or higher speed tier plans. Right first time installs were 93% for the Dec qtr., dipping slightly from 94% in the Sept qtr. Mgt. Briefing Highlights Any 5G threat? – Stephen Rue (CEO) highlighted the vast majority of data (~97%) is transmitted over fixed networks. He said he sees the trend of growing demand for data continuing on fixed networks as much as in mobile networks. NBN Write-down? - Stephen Rue responded to questions about a write-down commenting there was no accounting need for a write-down, arguing calls for a write-down were really about a wholesale price reduction. He said the NBN needs a strong business model & cashflows to ensure the future of the network. And he used the opportunity to highlight that the conversation needs to move to how the NBN contributes to people’s lives in various ways (e.g. improvement in access to data & information, supporting people build businesses & operate from any location, healthcare improvements, education quality benefits etc.). New Product launch – NBN expect to launch the new Wholesale Wireless Product in market by mid-2019, which will have max. download capability of 60mbps, & upload of 20mbps. For anyone interested, more results detail can be found by clicking here.
- TPG Telecom shares plunged 11 per cent to $5.87 after the combined Vodafone Australia and TPG Telecom group missed analysts’ forecasts for sales and EBITDA over the six months to June 30. UBS analysts also warned its average revenue per user for mobile subscribers of $31.80 missed expectations in finishing up 1 per cent. Total net mobile subscribers increased by 135,000 over the half. UBS also flagged cost pressures from electricity and marketing as impacting the result. The broker said positives included the 9¢ interim dividend and net mobile subscriber additions. Result Highlights 1H Revenue rose 46% to $1.3bn EBITDA was -$477m, improving 65% v. 1H/18 1H CAPEX spend was $2.9bn, up 2% from 1H/18, which focused primarily on the HFC, FttC & FttN network roll-outs. ARPU rose $1 to $45 Ready to Connect premises were 8.1m (up 32%), with active services reaching 4.7m, up 38%, (of which FttC were ~300k). As of January, 57% of activations are on 50mbps or higher speed tier plans. Right first time installs were 93% for the Dec qtr., dipping slightly from 94% in the Sept qtr. Mgt. Briefing Highlights Any 5G threat? – Stephen Rue (CEO) highlighted the vast majority of data (~97%) is transmitted over fixed networks. He said he sees the trend of growing demand for data continuing on fixed networks as much as in mobile networks. NBN Write-down? - Stephen Rue responded to questions about a write-down commenting there was no accounting need for a write-down, arguing calls for a write-down were really about a wholesale price reduction. He said the NBN needs a strong business model & cashflows to ensure the future of the network. And he used the opportunity to highlight that the conversation needs to move to how the NBN contributes to people’s lives in various ways (e.g. improvement in access to data & information, supporting people build businesses & operate from any location, healthcare improvements, education quality benefits etc.). New Product launch – NBN expect to launch the new Wholesale Wireless Product in market by mid-2019, which will have max. download capability of 60mbps, & upload of 20mbps. For anyone interested, more results detail can be found by clicking here.
- he targeted $125 million to $150 million in merger synergies is said to be on track in 2022
- he targeted $125 million to $150 million in merger synergies is said to be on track in 2022