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TPG share price dips following interim results release

We examine the highlights of the large-cap telco’s interim results.

5G is the question on every telecommunication provider’s lips. That, and apparently mulling potential asset sales. Luckily, TPG Telecom – the merged entity of TPG and Vodafone – provided information on both during its latest round of interim results.

Looking at those results, which cover the first-half of FY21, while TPG posted strong revenue growth, its earning came under pressure. The stock fell in response, trading down 2.50% to $6.44 per share by the afternoon session, on Friday, 20 August 2021.

Interim results unpacked

On the top-line, the teleco reported interim revenues of $2,630 million, implying an impressive year-on-year growth rate of 71%.

On a more granular level, those total revenues were made up of $2,195 million in services revenue – a weaker figure than the year prior, after TPG saw its mobile base decline. By comparison, handset revenues – which contributed $435 million in total interim revenues rose year-on-year, with covid-19 acting as a key tailwind.

Interestingly, while earnings (EBITDA) rose a substantial 67% in the first half, both NPAT and EPS crashed. TPG’s profits (NPAT) came in 8% lower at $76 million, while earnings per share (EPS) dove 71% to 4.1 cents per share. This was driven by unfavourable comps, with the company noting that in FY20 net earnings 'benefited from a $226m one-off accounting credit to income tax expense.'

Despite earnings weakness, TPG’s Board declared a dividend of 8.0 cents per share, representing 7% increase on the interim dividend paid in the H1 of FY20.

Finally, over the prior six month period, management noted that already $38 million in cost synergies had been realised – driven by the TPG-Vodafone merger.

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5G + assets sales

One of the key highlights from TPG's interim results was a focus on the strong progress the company has made thus far on building out its 5G mobile network.

'Our mobile network is better than ever through our fast-tracked 5G rollout and combined spectrum deployment, and this will support mobile and home wireless growth as 5G reaches scale in major cities by the end of the year,’ TPG's CEO, Inaki Berroeta said.

Here the business noted that it expects to have 85% population coverage – across ten cities in Australia – in 2021. All up, TPG currently has some 750 thousand 5G enabled devices on its network.

TPG management said it was currently taking advantage of 'innovative technologies and processes' to build out its 5G capacity faster, noting that it was pre-constructing 5G sites to expedite their rollout.

Elsewhere, and following in the footsteps of Telstra, TPG announced that it was currently undertaking a strategic review into its telecommunication tower assets.

The telco specifically noted that its mobile network is made up a 5,800 rooftops and towers.

'While the company is continually seeking opportunities to maximise shareholder value, it has not made any commitment in relation to these assets,’ the TPG CEO said.

Telstra recently made headlines after announcing plans to sell a 48% stake of its Towers business for $2.8 billion.

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