“It’s been hard for the merger because it got delayed by the ACCC and then you had COVID-19,” Mr McLeish says. “Vodafone has been the most impacted by border closures both from mobile roaming – which all of the operators are impacted by but a greater proportion of their postpaid customers tend to be from migration or expats returning.”
“The rationale for the merger is still sound, but they’ve been a bit unlucky on some of those factors.”
Telco analyst Ian Martin agrees the financial performance of the company would be very different if the merger took place when it was first unveiled in 2018.
“The expectations were too high at the time. People naturally thought that the merged company would look more like what TPG had achieved under David Teoh,” he says. “It’s a very different business. What we’ve seen over the last year is the reality of the merger has been better understood by the market.”
But Mr Martin thinks next month’s results will show TPG Telecom has been able to lay a solid foundation. And provided international travel picks up next year, he expects some sort of recovery for its mobile business.
“The real benefits of the merger are long term – they’re about how you built out fibre, more cell towers, expanding the 5G network and get into the enterprise market,” he says. “There’s a lot of groundwork that has got to be done in rolling out those towers and the fibre infrastructure…but you won’t see the benefits of that this year. It’s hard to see until their half year results in another few weeks, but don’t see why they wouldn’t [have achieved that foundation].”
ACCC chairman Rod Sims suffered a bruising loss in the courts when the merger was approved but does not appear to have let go of the issue. He took aim at TPG Telecom again several weeks ago, this time suggesting the merger had caused price hikes across the sector.
Mr Berroeta says the telco still implements discounts, but the company has successfully started providing more value for a higher price by getting customers to use more TPG products. More than 60 per cent of iiNet mobile customers have migrated to Vodafone’s mobile network.
“If you are an iiNet broadband customer, because of the merger you get the opportunity to have access to a much richer portfolio of products,” he says. “We also have handsets which is something that iiNet was never offering to customers. That is really the way we are capturing a bigger share of the telco spend of that particular customers but doing that through giving the customer more value.”
Mr McLeish says he would like to see TPG grow the amount of people paying for its fixed wireless products. TPG’s 5G fixed wireless services were rolled out from June.
“The whole off-net, on-net strategy was really what TPG was founded on originally and it’s added a lot of value to TPG shareholders,” he says. “I think that’s a key opportunity for them and a key area of value upside.”
Mr Martin says TPG Telecom needs to continue to focus on merger cost savings, growing its mobile customers and increasing its share of the enterprise segment (which refers to big corporate customers).
With billionaire Hong Kong business titan Canning Fok now entrenched as chairman, Berroeta says he is very happy with the new board and its involvement in directing the company. But McLeish says work still needs to be done to provide assurances to shareholders.
“Iñaki is the CEO, so there’s continuity from that point of view,” McLeish says. “But a lot of the shareholders were in TPG to back David to some extent, and so that is a loss and TPG is going to have to build back up that shareholder following again.“