TPG profit jumps 46 percent to AU$361m after iiNet acquisition

Australian fixed-line telecommunications provider TPG has reported its results for the 2015-16 financial year, announcing an underlying net profit of AU$361 million, up 46 percent year on year from AU$247 million thanks to strong corporate sales and growth in consumer broadband revenue.

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.

During the year, TPG acquired rival telecommunications company iiNet for around AU$1.5 billion, and followed that up with a deal with Vodafone Australia to make use of the latter's mobile network across the country.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) was AU$775.3 million, up 60 percent from AU$485.3 million, while reported EBITDA was AU$849.4 million, up 75 percent from AU$484.5 million.

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

TPG's net assets stood at AU$1.779 billion as of July 31, up from AU$1.003 billion, while cash and cash equivalents were AU$39.2 million, up from AU$23.7 million.

TPG consumer broadband contributed AU$605 million in revenue for the year, up from AU$544.4 million due to a growth in customers, as well as nine months of lower access costs thanks to the Australian Competition and Consumer Commission's final access determination.

Consumer mobile added AU$69.3 million in revenue, down from AU$83.7 million, and the TPG/AAPT corporate segment added AU$654.6 million, up from AU$642.5 million.

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.

Broadband subscribers numbered 983,000 for iiNet as of the end of July, down 5,000, and 885,000 for TPG, rising by 32,000.

TPG added 75,000 National Broadband Network (NBN) customers over the year, for a total of 119,000, and had 43,000 ADSL off-net stand-alone consumer customers, 141,000 ADSL stand-alone consumer customers, and 582,000 ADSL bundle consumer customers as of the end of July.

iiNet's broadband customers were broken down as 212,000 off-net ADSL customers, 539,000 on-net ADSL customers, 157,000 NBN customers, and 75,000 other broadband customers.

Mobile customers numbered 171,000 for iiNet, down by 5,000 year on year, which was more than offset by TPG's growth of 7,000 mobile customers, to a total base of 304,000.

Average revenue per user (ARPU) for the second half of the financial year for TPG was AU$67.20 per month for NBN customers, down by AU$0.20 from the first half of the financial year; AU$58.70, down by AU$0.40, for on-net ADSL and home phone bundle customers; AU$40.10, down by AU$0.20, for on-net ADSL customers; and AU$56.70, up by AU$2.80, for off-net ADSL customers.

iiNet's second-half NBN ARPU was AU$70.50 per month, up by AU$0.90; AU$50.10, up by AU$0.20, for on-net ADSL customers; AU$48.30, up by AU$0.40, for off-net ADSL customers; and AU$37.20, down by AU$1, for fixed phone customers.

TPG is also eyeing the Singaporean mobile market, having earlier this month submitted an expression of interest for prequalification for Singapore's 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 on Tuesday.

"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."

The spectrum auction, being held by the Singaporean Infocomm Development Authority (IDA), will see 900MHz and 2.3GHz spectrum made available to approved new entrant bidders. The IDA in February confirmed that it would be allowing the possibility for a fourth mobile entrant in the Singaporean market by April 2017 in order to increase competition.

The spectrum auction will be held in two phases: The first, to take place in Q3 this year, is open only to bidders that do not currently operate a nationwide mobile network in Singapore; and the second is open to Singapore's existing mobile providers Singtel, M1, and StarHub.

The two-phase process will release fresh spectrum to support a new mobile network operator, as well as enabling existing telcos to augment their mobile service offerings.

It was previously noted that the potential winner of the first phase would have to pay around SG$35 million, which was discounted from the previously proposed SG$40 million reserve price due to a change in the spectrum bundle being offered.

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 in March reported an underlying net profit of AU$162.3 million for the half year ended January 31, 2016, a 36 percent year-on-year rise, on underlying EBITDA of AU$368.8 million and revenue of AU$1.15 billion.