TPG Telecom profit slides amid inflationary pressure

TPG Telecom is planning to rationalise its sub-brands amid a profit slide in the second half of 2023.

While the carrier reported growth in postpaid mobiles, fixed wireless NBN services, and enterprise, government and wholesale, its net profit slid in the half-year, according to its half-yearly report [pdf].

Net profit after tax (NPAT) for the second half of 2022 was $167 million (this, however, included a $110 tax credit; without that, NPAT was $57 million); for the latest half year it was $48 million, on service revenue of $2.29 billion, which was up 4.5 percent on last year’s $2.2 billion.

Operating expenses rose 7.7 percent to $585 million, and capex ballooned by 38 percent to $670 million.

TPG Telecom called out inflationary effects on both staff and IT support costs as driving its rising operating expenses.

CEO and managing director Iñaki Berroeta highlighted “customer experience simplification” as part of TPG Telecom’s response, which the company predicted would yield a $140 million full-year cash benefit from 2027.

To achieve that, TPG Telecom’s brand rationalisation will be paired with a reduction in the number of plans and products the telco offers, from 6000 down to around 100.

“TPG Telecom has moved into execution of a multi-year program to simplify its brand portfolio, rationalise products and customer journeys, increase digitisation and streamline internal systems and platforms,” the company said in a statement [pdf].

It will also consolidate its technology platforms, with plans to implement single billing systems for its consumer operations and for enterprise, wholesale and government.

Shared infrastructure still important

While restating that it will not challenge the decision to refuse a spectrum and network sharing deal with Telstra, TPG Telecom said it still believes shared telecommunications infrastructure is the best way to improve mobile competition in regional Australia.

The company said it will add 250 sites to its 5G upgrade in the 80-90 percent population area; 2500 sites, around half its network, have already been upgraded.

The company also said it “will continue to explore alternative sharing options to expand its
network beyond existing 96 percent population coverage”.

Vocus’s $6.3 billion bid for TPG Telecom’s fibre assets remains under negotiation, with due diligence of the deal continuing until September 6.

“The Vocus offer reflects the strong performance of TPG Telecom's fixed infrastructure assets and business serving enterprise, government and fixed wholesale customers, the intrinsic value of which has not been reflected in our share price to date.

"We are considering the offer in line with our commitment to unlock value for shareholders," Berroeta said.