An expensive delay for TPG Telecom (ASX:TPG), which has seen a $1bn fall in the price of its fibre network infrastructure assets and its enterprise, government and wholesale fixed business to Vocus Group (ASX:VOC).
The deal was done yesterday at a price of $5.250bn. That includes a future $250m on performance payments.
In August last year the two groups failed to agree on a $6.3bn sale. Neither could agree on the complex terms and a path to finality.
The deal includes TPG’s enterprise, government and wholesale business, including its residential fixed access unit Vision Network, and its submarine business.
As part of the agreement, 560 TPG employees will shift to Vocus. The deal is due to close in a year’s time (in the second half of 2025) due to complex approvals and other factors, which will include a restructuring of TPG to allow the assets to be sold as a whole group.
As well, TPG will buy fixed network services from Vocus for an annual fee of $130m. That will have an initial 15-year term with two 10-year extensions at TPG’s election.
TPG said the transaction will deliver net cash proceeds in the range of $4.65 billion to $4.75 billion, which will be used to support future capital management and business investment initiatives.
TPG said there will be no change to guidance for FY24 earnings of $1.95bn to $2.03bn excluding material one-offs, and cash capital expenditure excluding spectrum payments of approximately $1.02bn. The company reiterated it is tracking towards the mid-point of the EBITDA guidance range.
Compared to the 2023 deal attempt, TPG CEO Iñaki Berroeta says the latest sale will see TPG selling “a smaller asset perimeter… resulting in a simpler operating model than was envisaged in the original discussions."
Berroeta said in Monday’s statement to the ASX that: “The deal unlocks the value of our fixed infrastructure assets while strengthening our financial position and creating a more focused and streamlined business with significant optionality for the optimisation of our capital structure.”
