TPG Telecom Ltd (ASX: TPM) released its 2018 financial results to the market today revealing a 4.1% fall in profit.
TPG is Australia’s second-largest ASX-listed telecommunications business behind Telstra Corporation Ltd (ASX: TLS), TPG operates the iiNet brand. TPG competes with Telstra, Optus and Vocus Group Ltd’s (ASX: VOC) Dodo and Primus on the NBN and mobile, it is also expanding internationally.
TPG Results:
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Here are some of the highlights from its public report:
- Revenue up 0.2% to $2.495 billion
- EBITDA down 5.6% to $841.1 million (click here to learn what EBITDA is)
- Underlying net profit up 3.7% to $432.6 million
- Net profit down 4.1% to $396.9 million
In March 2018 TPG guided that underlying EBITDA would bet $825 million to $830 million. So the achievement of $841 million appears to have beaten expectations.
TPG said that in FY18 underlying EBITDA and reported EBITDA are the same figure because there were no material items. Excluding non-recurring items, EBITDA grew by $6.1 million despite a $43 million EBITDA headwind with broadband customers moving from DSL to the NBN.
The NBN was a major cause of the Consumer Segment’s EBITDA falling by $17.3 million, the company said in a media release. However, the Corporate Segment’s EBITDA achieved a rise of $17.3 million thanks to strong data and internet sales.
Shareholders were rewarded with a final fully franked dividend of 2 cents per share, totaling 4 cents per share for the year when combined with the other 2 cents per share dividend paid from the half-year result. This is a large reduction from the 10 cents full year dividend paid in the previous year.
During the year TPG spent a total of $956.3 million on capital expenditure. Of this amount, $597.3 million was spent on spectrum payments and $101 million invested in building mobile networks in Singapore and Australia. This resulted in net debt of $1.266 billion at the end of the financial year with undrawn facilities of $1 billion.
Vodafone Australia Merger
The telecommunications industry was sent into a buzz when TPG and Vodafone Hutchison Telecommunications (Aus) Ltd (ASX: VHA) announced they would merge together. If the merger proceeds, the money TPG has spent on its own mobile network will complement the Vodafone infrastructure.
In Singapore, TPG said it is on track for its outdoor service coverage goal by the end of 2018, with the production network covering over 90% of outdoor areas.
FY19 Guidance
TPG’s David Teoh said the company is expecting FY19 “business as usual” EBITDA will be between $800 million to $820 million, compared to $841 million this year. The company is expecting another $50 million hit due to the NBN rollout.
However, TPG may not be a separate company for long, so the profit guidance above may not apply. Chairman Teoh said:
“A planned merger of equals with Vodafone Hutchison Australia which, subject to satisfaction of certain conditions precedent, including the approval of the ACCC, is expected to complete in 2019.”
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