The market appears to have looked beyond TPG Telecom’s (ASX: TPG) $107 million annual loss - compared to a $49 net profit last year - with the share price of the country’s third largest telco up 4% at the open.
Looking at the underlying commentary that followed today’s mixed result, the market was clearly encouraged by the expectation of ongoing service revenue growth and stable operating costs, helping to offset the financial impact of its regional network sharing deal and structural changes to a key enterprise IoT contract.
Assuming there are no major shifts in operating conditions, TPG expects earnings of between $1.95 billion and $2.025 billion in FY 2025, while capital expenditure (excluding spectrum payments) is forecast to be around $900 million, down from $1,014 million in FY 2024.
Management also anticipates a stronger operating free cash flow (OFCF) performance in FY25 due to reduced capital investment and improved working capital.
Growth in customer numbers
Commenting on today’s FY24 result, TPG’s CEO Iñaki Berroeta highlighted the group’s continued growth in mobile service revenue, which grew 5.4% due to rising average revenue per user.
Berroeta told investors to expect growth in customer numbers now that the group had achieved an expanded reach into regional Australia.
Over the coming years, TPG Telecom is positioned to capture greater revenue share following the significant increase in the reach of our mobile network, while making things even simpler for our customers and delivering an increasingly efficient cost and capital base,” said Berroeta.
“We have made substantial progress with our strategy, doubling the size of our mobile network coverage through our innovative regional sharing agreement with Optus.”
Berroeta also noted the sale of the group’s fibre infrastructure and EGW Fixed assets to Vocus, to further simplify the business and derisk network costs.
Here’s a look at what happened during FY24
Excluding the previously disclosed $250 million non-cash impairment (originally disclosed in April 2024) of decommissioned mobile network sites, earnings of $1.9 billion were up 3.4% and at the mid-point of company guidance.
Driven by strong performance in mobile services, the group reported a 1.5% increase in service revenue to $4.7 billion.
Overall, the key drivers of this growth were higher average revenue per user (ARPU) and a boost in Prepaid subscribers, which offset the underlying weakness in the Postpaid segment.
Underpinned by strong demand for its Prepaid digital brands and a major contract win with mobile virtual network operator (MVNO) Lyca Mobile, the group’s total mobile subscriber base grew 1.8% to 5.51 million.
While the group remained Australia's largest Fixed Wireless provider, total fixed subscribers declined 2.4% to 2.08 million.
TPG lost around 49,000 postpaid users but lifted ARPU to $49.30 from $47.70.
Prepaid users grew 79,000 with ARPU lifting to $20.70 from $19.80.
Other key numbers include:
- Gross profit was up 3.5% to $3.2 billion
- Operating expenses were down 3.6% to $1.2 billion
- Statutory EBITDA was down 8.7% to $1.7 billion
- Underlying net profit after tax was up 4.8% to $87 million
- Total dividends remain unchanged at 18 cents per share
TPG Telecom has a market cap of $8.8 billion making it the ASX’s 64th largest stock; the share price is up 1% in one year and up around 6% year to date.
TPG shares appear weak with little demand.
Consensus is Hold.
This article does not constitute financial product advice. You should consider independent advice before making financial decisions.
