TPG Telecom has suffered a fall in profit and subscriber numbers at the half-year mark but still expects to lift full-year earnings.
The telco challenger is looking to higher business customer numbers, cost cuts and a margin reprieve from a slowdown in the national broadband network rollout to improve underlying earnings for 2017/18.
On Tuesday TPG booked an 11.3 per cent fall in first-half profit to $198.7 million in a result skewed by $55.8 million in one-off sale proceeds a year earlier
Underlying profit increased five per cent to $217.7 million.
But broadband subscriber numbers fell for TPG’s internet service brands, weighed down by a dip in iiNet subscribers, from 979,000 six months ago to 966,000.
Subscribers to the TPG branded service rose marginally to 962,000 from 957,000 in July last year, while the number of customers on slimmer-margin NBN packages rose to 341,000, from 262,000.
Morningstar analyst Brian Han said while the NBN is weighing on subscriber numbers, iiNet pricing is also to blame.
“The broadband market is very tough and there are a lot of retailers offering good deals,” Mr Han told AAP.
“So what happens in this competitive environment is iiNet’s pricing leads to greater churn, which means customers are switching in and out because of the competitive demands of the market.”
TPG now expects full-year underlying earnings to be between $825 million and $830 million, up from between $800 million and $815 million previously.
TPG’s consumer division earnings fell marginally compared to a year ago, in a fall driven by broadband margin erosion and the loss of home phone voice revenue on the back of the national broadband network rollout, TPG said on Tuesday.
But the company said NBN Co’s decision to delay the rollout of NBN services on the hybrid fibre coaxial network had helped it manage its margins with more customers remaining on DSL services.
The company’s corporate segment’s earnings rose to $158.9 million from $157.2 million a year ago, on the back of continued strong data and internet sales offsetting ongoing declines in voice revenues.
Underlying earnings also rose slightly from $417.6 million to $418.2 million, and revenue grew to $1.3 billion, from $1.2 billion
TPG also announced a cut to its fully franked interim dividend to two cents, down from eight cents a year ago.
Shares in the group were down 25 cents, or 4.1 per cent, to $5.79 at 1526 AEDT.
TPG TELECOM’S H1 RESULTS AT A GLANCE:
* Net profit down 11.3pct, to $198.7m
* Revenue up 0.8pct to $1.3b
* Interim fully franked dividend of 2 cents, down from 8 cents