TPG loses AU$2.1b in value after results announcement

TPG's net profit of AU$361 million and EBITDA of AU$775.3 million on revenue of AU$2.388 billion was not enough for the market, with the telco falling by AU$2 billion in value by the close of the ASX.

Australian fixed-line telecommunications provider TPG has seen its market capitalisation fall from AU$10 billion to AU$7.9 billion in the space of a day after announcing its financial results for FY16.

The loss in value was attributed by analysts to an "earnings miss", with shares down by AU$2.53, or 21.4 percent, to AU$9.28 at the end of Tuesday.

"An earnings miss will amplify the downward sentiment and cast a doubt over its ability to continue to grow, given its secretive nature and less local acquisition opportunities," Telsyte principal analyst Foad Fadaghi said.

"The losses today wiped a full year's growth off the stock, indicating a sharp correction, and might be a reflection of the increased competition in the lower end of both the mobile and fixed telecoms market in Australia."

TPG on Tuesday morning reported underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$775.3 million, up 60 percent from AU$485.3 million.

Analysts had expected EBITDA of AU$779 million, however.

Morningstar analyst Brian Han added that TPG said it would be spending more to protect its market share. Capex is due to increase from AU$281 to between AU$370 million and AU$420 million, TPG said, due to spending on spectrum and fibre rollout.

One such expense could be TPG's attempt to enter the Singaporean market, having earlier this month submitted an expression of interest for prequalification for the mobile spectrum auction in hopes of becoming the fourth mobile operator in Singapore.

"TPG Telecom (Singapore) lodged [an] expression of interest to bid for up to 75MHz of spectrum. If successful, we will move quickly to establishing a substantial Singapore operation with strong local management and mobile expertise," TPG said in its results presentation.

"The Singapore business will be funded from existing debt facilities and cash generated from Australian operations. Singapore regulator (the IDA) has established policy settings to encourage competitive investment which will benefit both consumers and Singapore's status as a smart nation. For TPG, those policy settings and the competitive environment represent an exciting long-term investment opportunity outside Australia."

It was previously noted that the potential winner of the first phase would have to pay around SG$35 million.

TPG will be made aware of whether it successfully prequalified for the auction later this year.

Last month, TPG also denied reports that it is considering entering the New Zealand mobile market via an acquisition of New Zealand's third-largest mobile telco 2degrees.

TPG's spending also saw it acquire rival telecommunications company iiNet for AU$1.5 billion during the financial year, and follow that up with a AU$1 billion deal with Vodafone Australia for mobile services.

The telco also reported an underlying net profit of AU$361 million, up 46 percent year on year. Reported net profit -- which did not include the gain on its previously held interest in iiNet, the profit on its sale of shares, the one-off acquisition transaction costs of iiNet, non-recurring iiNet reorganisation costs, and acquired customer base intangible amortisation -- was AU$379.6 million, up 69 percent from AU$224.1 million.

Revenue for the 12-month period was AU$2.388 billion, up 88 percent from AU$1.271 billion.

TPG made losses across consumer mobile, down from AU$83.7 million to AU$69.3 million in revenue, but gains in consumer broadband and TPG/AAPT corporate.

iiNet contributed AU$1.059 billion in revenue: AU$704.5 million in broadband, AU$204.1 million in fixed voice, AU$54.6 million in mobile, and AU$95.7 million in other.

iiNet lost 5,000 broadband subscribers and 5,000 mobile customers over the year, while TPG gained 32,000 broadband customers and 7,000 mobile subscribers.

With AAP