Ready to rumble
FY22 RESULT
Need To Know
- Minor miss on consensus forecasts
- Mobile growth is very good, price and subscriber momentum
- Final dividend 9cps (full year 18cps)
Mobile growth is providing the backbone of TPG Telecom’s earnings and is heading in the right direction.
Result. FY22 EBITDA was $1,733m, including $60m of restructuring costs compared to consensus at $1,774m. EBITDA in 2H22 grew by 9% (excl restructuring costs) indicating positive momentum in this key business.
Underlying net profit of $222m was also mildly below consensus at $258m.
TPG introduced a $5 price rise for new subscribers during the year that has now been extended to existing customers. This could add around $130m EBITDA in a full year. Mobile service revenue in 2H22 increased 4.7% with positive outcomes for subscribers growth (+300k to 3.2m total postpaids and 2.0m prepaids) and ARPU ($42.70 postpaid +3.1%). Broadband subscribers fell -5k in 2H22 but Fixed Wireless subscribers have doubled to 171k, ahead of the company’s target.
TPG achieved $140m of synergies following the merger with Vodafone which was mid-range of its $125-150m target. This was a good outcome considering the tight labour market, higher energy costs and inflation.
FY23 guidance is for EBITDA in a range of $1,850-1,950m, excluding a further $50m of restructuring costs. Current consensus forecast is for $1,870m.
Investment View
At the half-year result, we expected more pain before TPG could begin to see the benefits of its restructuring and other initiatives. As with Telstra, TPG is now seeing a more stable mobile industry and is finally taking advantage by increasing prices. TPG has been slow to lift its prices relative to its peers.
The Fixed Wireless strategy is a sleeper for TPG which is best placed to convince lower usage customers to abandon the NBN and go to fixed wireless service.
The Australian Competition Tribunal decision on the ACCC’s rejection of the regional mobile network sharing agreement with Telstra is due by June this year.
The share price has languished as the company gets its ducks in a row, but this time is close. The mobile business is in good shape and may surprise the market this year.
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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