Is Vodafone looking to exit Australia's TPG Telecom?

Vodafone Group is weighing the possible sale of its stake in Australian telco TPG Telecom, according to local media.

Australian Financial Review reports Vodafone bosses are closely tracking TPG's share price as they contemplate an exit from the third-ranked player in the market.

Vodafone and Hutchison 3G Australia together have held 50.1% of the fixed and mobile operator since merging with ISP TPG in July 2020.

Under new CEO Margherita Della Valle, Vodafone's UK-based parent has sold off multiple assets in an effort to pare debt and refocus its sprawling operations. 

Della Valle has said the company will confine itself to "markets where we see the right combination of sustainable market structures and sufficient scale to grow and to deliver returns above our cost of capital."

Where these conditions are not met, the company will "take actions."

The Telstra-dominated, low-growth Australian market certainly looks ripe for "actions," especially after major setbacks for TPG in the past year.

TPG setbacks

In one, regulators turned down its attempted network sharing deal with Telstra; in the other Vocus walked away from the chance to buy a chunk of TPG's fiber assets. With its stock down 40% since the merger, and its financial performance modest, the operator needs some fresh options. 

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It reported 12% higher EBITDA and a 4.5% rise in revenue in the first half of the current year. Net profit was 48 million Australian dollars (US$32 million), down from AU$167 million ($111 million), impacted by tax losses from the sale of tower assets.

TPG shares traded 0.78% higher Monday and are up 4% in the past month. With market cap of AU$9.5 billion ($6.3 billion), a sale of Vodafone's 25% stake in TPG could yield around AU$2.4 billion ($1.6 billion).

Worldwide, Vodafone is awaiting approval of its merger with Three UK. Last October it banked €5 billion (US$5.5 billion) from the sale of its Spanish unit, to Zegona.