TPG Telecom (ASX:TPM)

TPG is a force in the Australian telecommunications industry. The Group's people, products, network assets, and innovation have enabled them to provide their customers with communication services that are reliable, fast and cost-effective.

The Group provides a diverse range of communication services to residential users, small and medium enterprises (SMEs), government, large corporate enterprises, and wholesale customers. TPG offers nationwide ADSL2+, NBN, Fibre Optic and Ethernet broadband access, telephony services, Internet Protocol Television (IPTV), SIM Only Mobile plans and various business networking solutions.

TPG owns end-to-end network infrastructure which includes over 400 DSLAM enabled telephone exchanges across Australia, extensive inter-capital and metropolitan fibre optic networks, and the international PPC-1 submarine cable connecting Australia and Guam with onwards connectivity to USA and Asia.

As TPG owns and operates its own carrier-grade voice, data, and internet network infrastructure, The Group has the network capability to deliver exceptional performance across every level of the organisation and take end-to-end responsibility in the services they offer.

The Group operates the following divisions:^[1]

Key strategies include:^[3]

• To build a platform for long-term growth while simultaneously continuing to compete hard in the marketplace and optimise costs

• To built mobile network in Australia and Singapore

The Group operates in markets including:^[4]

Major competitors include:^[5]

• Telstra (ASX:TLS)
• SingTel Optus
• Vocus Group Ltd (ASX:VOC)

1986^[6]   

TPG founded as Total Peripherals Group

2008   

Reversed Takeover by TPG of SP Telemedia Limited

2009   

SP Telemedia Limited renamed TPG Telecom Limited and ASX code changed from SOT to TPM

2010   

Acquired Pipe Networks

2011   

Acquired IntraPower (Trusted Cloud)

2014   

Acquired AAPT

2015   

Acquired iiNet

2016   

TGP became Singapore’s 4th mobile operator

2017   

Telecom Acquires 700MHz Spectrum in Australia

2018    

Merged  business with Vodafone Hutchison Australia

Board of Directors^[7]

David Teoh – Executive Chairman and Chief Executive Officer

Denis Ledbury – Independent Non-Executive Director

Robert Millner – Non-Executive Director

Joseph Pang – Independent Non-Executive Director

Shane Teoh – Non-Executive Director

Company secretary

Stephen Banfield – Company Secretary

2018 Full Year Results Presentation

Financial Year 2017/2018 (ended 31 July):^[8]

Major risks include:^[9]

Business Risks

Competitive Environment

Increased competition, for example as a result of the NBN rollout, could impact the Group’s financial performance by affecting its ability to grow its customer base and/or its ability to make money from its service offerings. The Group attempts to mitigate this risk by continually reviewing its customer offerings, their pricing relative to the market and customer needs. This is combined with constant reviews of the Group’s cost structures with the objective of optimising costs to ensure the Group is best placed to continue providing value leading services.

Business Interruption

A significant disruption of the Group’s business through network or systems failure could cause financial loss for the Group and increased customer churn. The Group maintains business interruption insurance and continually invests in its network and systems to improve their resilience and performance.

Regulatory Environment

Changes in regulation can significantly impact the Group’s business. In addition, failure to comply with regulatory requirements could create financial loss for the Group. The Group attempts to mitigate this risk through close monitoring of regulatory developments, engaging where necessary with the relevant regulatory bodies, and monitoring its own compliance with existing regulations.

Data Security

Failures or breaches of data protection and systems security can cause reputational damage, regulatory impositions and financial loss. Australian Privacy Principles (APPs) now govern privacy and data protection throughout Australia and significantly enhance privacy and data protection regulation.

Financial Risks

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. The Group’s exposure to credit risk is influenced by the individual characteristics of each customer, the industry and the geographical region in which the customers operate. The Group minimises concentration of credit risk by undertaking transactions with a large number of customers. By industry, the Group is not subject to a concentration of credit risk as its customers operate in a wide range of industries.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising return.

• Currency Risk

The Group is exposed to currency risk on revenues, expenses, receivables and payables that are denominated in a currency other than its functional currency, the Australian dollar (AUD). These other currencies include primarily the United States dollar (USD), the Singapore dollar (SGD), the New Zealand dollar (NZD), Philippine peso (PHP), the Hong Kong dollar (HKD), and the South African Rand (ZAR). As at 31 July 2018, currency risks associated with the Group’s foreign currency denominated receivables and payables are not considered to be significant.

• Interest rate risk

The Group is exposed to interest rate risk arising from the variable interest rate on its long term borrowings. To manage this risk, the Group has entered into interest rate swap contracts to hedge the interest rate risk on $800m of its debt facilities. These contracts will enable the Group to convert its borrowings from floating rates to fixed rates for 5 years starting from December 2019.

• Equity Price Risk

The Group is exposed to equity price risk because of its investments in available-for-sale equity securities. Material investments are managed on an individual basis with the goal of maximising returns.