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TPG net profit jumps to AU$162m after iiNet acquisition

With subscriber numbers bolstered by its recent acquisition of iiNet, TPG has reported a six-month net profit of AU$162.3 million on revenue of AU$1.15 billion.
Written by Corinne Reichert, Contributor

TPG has published its financial results for the half year ended January 31, 2016, reporting underlying net profit of AU$162.3 million, a 36 percent year-on-year rise from the AU$119.2 million reported for the first half of FY15.

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$202.5 million, a 90 percent increase from the first half of FY15.

TPG's revenue jumped by 84 percent, from the AU$627.3 million reported for the same period last year up to AU$1.15 billion.

The company reported underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$368.8 million, a growth of 56 percent from the AU$236.2 million reported a year earlier. Reported EBITDA was AU$437.3 million, an 85 percent rise.

TPG acquired rival iiNet in a deal worth around AU$1.5 billion last year, which the Australian Competition and Consumer Commission (ACCC) and the Federal Court approved in August after iiNet shareholders also voted in favour of the takeover in July.

"iiNet contributed EBITDA of AU$107.1 million for the five-and-a-quarter months post-acquisition, inclusive of AU$4 million of restructuring costs arising from integration activities, without which the EBITDA result would have been AU$111.1 million. By comparison, iiNet reported AU$97 million underlying EBITDA for 1H15," TPG said in its results report.

"The principle drivers of the 1H16 EBITDA growth were realisation of post-acquisition integration benefits, three months of lower access costs arising from the ACCC's fixed-access determination, and an increased contribution from Tech2."

Net assets stood at AU$1.65 billion, a jump of 64.6 percent from the AU$1.003 billion reported a year earlier. Cash and cash equivalents were AU$38.8 million as of the end of January, a slight rise of 7.5 percent from the AU$36.1 million for the first half of FY15.

Capital expenditure amounted to AU$133.4 million, which was 58.4 percent more than a year earlier thanks to the AU$15.2 million iiNet capex and a one-off AU$27 million purchase price to acquire an office in Glebe, Sydney.

A breakdown of revenue saw TPG consumer broadband bring in AU$295 million, AU$31 million more than last year; consumer mobile fall by AU$8.1 million, down to AU$35.9 million for the half year; TPG-AAPT corporate grow by AU$5.1 million, up to AU$325.2 million; and iiNet bring in AU$496.9 million in total.

Broadband contributed AU$326.8 million to iiNet's total revenue; fixed voice AU$101.4 million; mobile AU$27 million; and "other" AU$41.7 million.

Broadband subscribers for TPG grew by 32,000, up to 853,000, with iiNet adding a further 989,000 broadband subscribers. Combined, TPG now has 1.84 million broadband customers.

National Broadband Network (NBN) customers grew by 34,000 during the six-month period, with 78,000 customers now accessing the NBN through TPG.

TPG's mobile customers numbered 297,000 as of the end of January, a drop of 123,000 customers over the six months, with numbers bolstered by 176,000 up to 473,000 in total thanks to iiNet's mobile customers.

Average revenue per user (ARPU) for TPG NBN customers was AU$67.40, while for iiNet NBN customers it was AU$71.30; ARPU for TPG bundles of on-net ADSL plus home phone was AU$59.10; ARPU for TPG stand-alone on-net ADSL was AU$40.30, while for iiNet it was AU$53.60; ARPU for TPG off-net ADSL was AU$53.90, while for iiNet it was AU$49.90; and ARPU for iiNet fixed phone was AU$38.20.

In regards to the AU$1 billion, 15-year deal with Vodafone that will see TPG build out an extra 4,000km of fibre to connect Vodafone's cell towers across Australia, TPG said construction has commenced and is on track, with the majority of sites to be completed in 2018.

Capex for the project will amount to between AU$300 million and AU$400 million, with the contract expected to deliver minimum revenue of AU$900 million.

Under the Vodafone deal, TPG will also make use of the former telco's mobile network.

TPG is expecting EBITDA of between AU$770 million and AU$775 million for the full year.

TPG's results come more than a month after fixed-line rivals Optus and Telstra reported theirs.

Optus announced a net profit of AU$227 million on revenues of AU$2.43 billion for the quarter ending December 31, due to growth in mobile and NBN.

EBITDA was AU$685 million, up AU$33 million or 5.1 percent from the AU$652 million announced in December 2014.

Optus lost 26,000 mobile post-paid handset customers over the quarter due to "the deactivation of a wholesale customer" -- likely TPG -- but gained 61,000 prepaid handset customers, with total 4G customers up 314,000 quarter on quarter, to 4.45 million.

Telstra recorded a net profit of AU$2.13 billion, revenue of AU$13.68 billion, and EBITDA of AU$5.41 billion for the six months ending December 31.

Revenue from Telstra's fixed business decreased by 1.5 percent, down to AU$3.56 billion, with fixed data revenue growing by 6.7 percent, to AU$1.25 billion. Revenue from voice services declined by 7.6 percent, to AU$1.77 billion.

Telstra added 121,000 retail fixed broadband customers, bringing the total to 3.3 million, and 163,000 retail fixed bundle customers over the half year, to 2.2 million in total. Fixed voice customers numbered 5.9 million, while fixed voice ARPU decreased by 4.8 percent, to AU$40.66. Fixed data ARPU was AU$51.60, a rise of 0.1 percent.

Telstra added 118,000 NBN connections over the half for a total of 329,000 NBN connections -- 18,000 data only, 52,000 voice only, and 259,000 voice and data bundles.

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