TPG Telecom Warns of Earnings Headwinds From Broadband Shift

   By Robb M. Stewart 
 

MELBOURNE, Australia--Australian telecommunications company TPG Telecom Ltd. (TPM.AU), which has struck a deal to merge with rival Vodafone Hutchison Australia, has warned its underlying earnings are likely to be squeezed over the coming year as consumers continue to migrate to the federal government's nationwide broadband network.

The guidance came as TPG reported a 4.1% decline in annual net profit but earnings before interest, tax, depreciation and amortization and revenue in line with targets released late last month with news of an agreed takeover by Vodafone Hutchison.

On Tuesday, the company said another year of anticipated ebitda growth was expected to be offset by profit-margin headwinds with the migration to the National Broadband Network and by a one-time accounting hit with the adoption of a new revenue-accounting standard.

With that, it said ebitda before accounting for the start-up of new wireless telecom operations in Australia and Singapore is forecast to fall to 800 million Australian dollars ($574.2 million), to A$820 million, this financial year after a less than 1% rise in underlying earnings, to A$841.1 million, in the year through July.

Net profit for the latest year was down 4.1%, to A$396.9 million, from A$413.8 million the year before, while revenue was up slightly to almost A$2.5 billion from A$2.49 billion.

Late last month, TPG said it had agreed to a takeover by Vodafone Hutchison in a deal that would create a company with an enterprise value of about A$15 billion and would bring together is more than 1.9 million fixed-line residential subscribers with its rival's roughly 6 million mobile-service customers.

Australia's telecom operators have struggled in recent years with intense competition that has been heightened as the federal government rolls out the NBN, which sells capacity to the operators that in turn sell broadband services to consumers. TPG had plans to roll out an aggressively priced mobile telecom network to challenge the country's three incumbents, which include Telstra Corp. (TLS.AU) and Singapore Telecommunications Ltd.-owned (Z74.SG) Optus.

TPG said it would pay a final dividend of 2 Australian cents a share, in line with the first-half payout.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

September 17, 2018 19:09 ET (23:09 GMT)

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