TPG Telecom to cut brands, product lines in streamlining plan

Australian telco TPG will eliminate some brands and slash its sprawling product portfolio in a multi-year transformation program.

Unveiling its first-half results Thursday, the company said the program would deliver an additional 140 million Australian dollars (US$90 million) annually from 2027, although in the next two years it will incur A$15 million ($9.6 million) to A$20 million ($12.9 million) in annual costs. The gains will come from a smaller capex budget, higher basic earnings margins and lower costs, the company said.

TPG, Australia's third largest telco, reported an 8% fall in underlying first-half earnings, with net profit down 70% thanks to a A$110 million ($70.7 million) tax benefit last year. Operating cost grew 8%, to A$585 million ($376 million), due to inflation and high labor expenses.

But it improved service revenue by 4.5% and earnings by 12%, while mobile ARPU ticked up 2.8% and postpaid ARPU 6.2%. It added 39,000 mobile subscribers to take the total to 2.18 million.

The company raised its full-year earnings outlook to A$1.925-1.950 billion ($1.2-1.25 billion), the upper end of the previous guidance.

TPG has grown through a series of acquisitions of smaller telcos and ISPs, culminating in its merger with Vodafone Hutchison Australia in 2020. It said its transformation program would "simplify its brand portfolio, rationalize products and customer journeys, increase digitalization and streamline internal systems."

Regional setbackIt suffered a setback in June when regulators rejected a network-sharing deal with Telstra. The arrangement would have given TPG access to much of Telstra's rural infrastructure while offering Telstra use of its spectrum in return.

Now TPG says it is halfway through upgrading its metropolitan cell sites to 5G, with plans to upgrade 250 regional sites as well. It says its capex budget remains unchanged.

CEO Iñaki Berroeta said the company still believes network sharing is the most economically sustainable means of improving connectivity in rural areas and the company is exploring options to expand its network.

"TPG will continue to advocate for sensible policy reform to deliver the essential communications services and competition regional Australia deserves," he said.

The company is still in talks with fiber specialist Vocus over the possible sale of most of its wholesale and enterprise fixed network assets. Berroeta said the $6.3 billion offer indicated the value of the fixed network portfolio, "the intrinsic value of which has not been reflected in our share price to date."

TPG stock closed 2.2% higher on the ASX on Thursday.

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— Robert Clark, contributing editor, special to Light Reading