Telecom group TPG shares jumped 9% at one stage yesterday after management and the board reaffirmed its annual earnings guidance in an effort to assuage investor concerns in the wake of rival Vocus Communications’ disappointing earnings update in late November.
TPG told shareholders at its annual general meeting that its financial year-to-date results are “ racking well against guidance" issued in September, helping push the stock higher.
TPG shares ended up 6.9%, to $7.22.
The meeting was told that management expects underlying earnings before interest, tax, depreciation and amortisation of between $820 million to $830 million for the year to July 31, 2107 – an increase of of up to 7% on 2015-16’s figure (which disappointed at the time of the update in September).
It also reiterated its expectation of annual capital expenditure of $370 to $420 million, up 49% from $281 million in the year to June. TPG shares were heavily sold-off in September after the group warned that its profit margin would come under pressure and then again last month when Vocus issued its sock update which was actually a downgrade.
TPG chairman David Teoh told shareholders that the company will use its extensive infrastructure assets to help offset margin headwinds the group faces as it transitions to the national broadband network.
“We have ahead of us numerous exciting opportunities to consider and strategies to implement using our extensive infrastructure assets and other strengths which I am confident will continue to create excellent value for our shareholders over the long term,” Mr Teoh said. “I think long-term it will be very good for the group and we should know that this month whether we are successful or not, so things like that, we’re trying to look more long-term," Mr Teoh told the meeting
Mr Teoh urged shareholders to back the company and its track record of delivering.
"If you’re long-term investors, you came to the group eight years ago, you’d be laughing. My job is to not focus on the share price and focus on the business."
TPG is in the process of trying to become a mobile service provider, having purchased various lots of spectrum, and is keen to get its hands on an allocation of spectrum to be auctioned off in 2017.
Mr Teoh said acquiring tower space was very difficult in Australia, but TPG needs to be in mobile.
To this end, TPG is one of two remaining bidders vying to become Singapore’s fourth mobile phone company. The auction is expected to take place before Christmas. If it wins it will be taking on Optus owner, SingTel, in its home market.
TPG chief financial officer Stephen Banfield also outlined areas that the business is focusing on to help it mitigate NBN margins headwinds.
"We as a group are embracing NBN. The NBN rolling out and we strive to be the best provider of NBN services. But, at the same time it’s very important that we focus on our on-net business, where our strengths are, we’ve spoken about our fibre-to-the-building services,” Mr Banfield said.
