TPG took AU$90 million hit from COVID-19 in 2020

TPG Telecom -- the culmination of the TPG Corporation-Vodafone merger -- revealed that the financial impact of COVID-19 during the fiscal year 2020 was approximately a AU$90 million hit to its earnings before interest, tax, depreciation, and amortisation (EBITDA), which ended up being AU$1.39 billion.

The results account for 12 months of the former Vodafone Hutchison Australia (VHA) and six months of the now-defunct TPG Corporation (TPG Corp) as the merger was finalised midway through the fiscal year.

Read more: Vodafone Australia and TPG merger: Everything you need to know

Net profit after tax (NPAT) was AU$734 million after the company paid AU$820 million in taxes for the year. The AU$820 million tax bill was the byproduct of an accounting credit to income tax expense that was not previously recognised in the company's accounts.

For the year to December 31, revenue amounted to AU$4.35 billion, up from AU$3.5 billion from the corresponding period last year, while EBITDA rose 18% to AU$1.39 billion. The revenue boost was due to service revenue growing by 44%.

Looking at TPG's various customer bases, broadband saw a 6% year-on-year increase to 2.17 million, representing a growth of 117,000. The company's NBN base also grew by 28% to 1.9 million, adding 415,000 new subscribers for the year.

The company's mobile base, much like those of other telcos, was impacted by the absence of overseas visitors and migrants coming to Australia due to border closures. As a result, its postpaid mobile subscriber base dipped 5% to 3.26 million while postpaid average revenue per user dipped 5.1% to AU$40.90 from a strong decline in roaming revenue.

TPG's prepaid subscriber base suffered a similar fate, dropping 22% to 1.97 million from 2.52 million. Unlike its postpaid subscriber base, however, the dip in prepaid numbers was due to the company's "inability to compete aggressively" during the merger process.

On a pro forma basis, which calculates figures to simulate what TPG's results would have been if the merger had been effective for the entire year, its numbers dropped across the board. Pro forma revenue decreased by 6% to AU$5.52 billion, while both EBITDA and NPAT dropped 10% to AU$1.79 billion and AU$282 million, respectively.

Categorising TPG Telecom's pro forma revenue into its consumer and corporate segments, both declined by 7%, primarily due to COVID impacts, price erosion, and loss of low-margin NBN wholesale business, it said.

For 2021, TPG said COVID-19 would continue to impact the telco, with lower international roaming and international visitor revenue expected to continue into 2021. It also expects total NBN headwinds of around AU$60 million.

"While we are in a stronger position to respond to aggressive competition in the market and mitigate headwinds, we will continue to be impacted by global travel restrictions, NBN margin erosion, and the new RBS levy," TPG CEO Inaki Berroeta said.

To counteract NBN headwinds, Berroeta said the telco would work towards shifting customers from NBN to its fixed-wireless services while continuing to progress merger integration activities.

Berroeta added that the telco is targeting AU$70 million in cost synergies as it continues merger integration, which excludes any savings contributions from the cross-selling of fixed-wireless services.

Providing an update on its 5G rollout, Berroeta said the telco expects to offer 5G fixed-wireless services during the first half of 2021 and is on track to provide 85% 5G population coverage by the end of the year.

"As we move into 2021, we are building on momentum gained in the final quarter of 2020, continuing our merger integration plans, our 5G mobile network is on track to reach scale in the top six cities by the end of the year, and we will begin offering 5G fixed wireless services in the first half," he said.

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