Messy, but 2H22 will be better
Need to know:
- Headline result looks weak, muddied by reporting changes
- Interim dividend 9cps fully franked, payment date 12 October
- Company is at turning point, basic metrics look OK
Investment implications
1H22 EBITDA $837m was -7.5% to consensus $905m. Adding back $35m of redundancy costs closes the gap but still short. These costs were flagged at the recent Investor Day. Higher NBN wholesale charges and more expensive handsets also to blame.
Underlying net profit $167m includes $110m one-off uplift from a capital loss benefit.
It’s not all bad. Mobile post-paid net adds were +22k and ARPU increased 1.4% to $42/month. Total mobile net adds were +135k.
Broadband subscribers increased 1k and Fixed Wireless subs jumped 33k to 113k. This is the big NBN-killer, potentially. TPG is targeting 160k subs by end of 2022.
TPG has changed reporting disclosure, no longer giving divisional EBITDA.
Recall that TPG sold its Towers business in May for $950m.
The regional network sharing deal with TLS is yet to be approved by the ACCC but could be very beneficial.
Merger synergies of $125-150m on track for FY22.
The 1H22 result does look messy, particularly due to reporting changes, but we think 2H22 could be much better when adding in a $5 broadband price increase and mobile subs and ARPU improving.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Stock overview
Share Price
Company overview
TPG Telecom is Australia’s third largest mobile network operator and has a sizeable broadband customer base.
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