Tpg Telecom Limited · ASX:TPG
Tpg Telecom — Investor Day (June 2022)
69 slides from Tpg Telecom's investor day presentation, Jun 23, 2022
Slide 1: ASX cover note: correction to Appendix slide 66
Market Announcements Office Australian Securities Exchange For personal use only Level 4, 20 Bridge Street Sydney NSW 2000 Sydney, 23 June 2022 2022 Investor Day Presentation – Correction to Appendix slide 66 TPG Telecom Limited (ASX: TPG) advises that there are some minor corrections to Appendix sl
Slide 2: TPG Telecom Limited Investor Day
1 TPG Telecom Limited Investor Day For personal use only 23 June 2022
Slide 3: Acknowledgement of Country
2 Acknowledgement of Country For personal use only TPG Telecom acknowledges the Traditional Custodians of Country throughout Australia and the lands on which we and our communities live, work and connect. We pay our respects to their Elders, past, present and emerging. ‘Listening to Land - Connectin
Slide 4: Safety instructions
3 Safety instructions For personal use only In case of an emergency, the MCA function staff will take the lead. Please follow their instructions. The emergency assembly point is First Fleet Park, which is located the right/southern side of the guest entrance. Wi-Fi details: MCA_Venues MC@3v3nt$
Slide 5: Today's agenda
4 Today’s agenda For personal use only Iñaki Berroeta 09:30 Introduction Chief Executive Officer & Managing Director 09:55 Consumer Kieren Cooney Group Executive, Consumer 10:20 Enterprise, Government & Wholesale Jonathan Rutherford Group Executive, Enterprise, Government & Wholesale 10:45 Break Ana
Slide 6: Introduction
5 For personal use only Introduction Iñaki Berroeta Chief Executive Officer & Managing Director
Slide 7: Introducing the Executive Leadership Team
6 Introducing the Executive Leadership Team For personal use only Presenting today Group Executive Group Executive Group Executive Chief Technology Chief Financial Group Executive Group Executive Consumer Enterprise, Customer Officer Officer People Experience Legal & External Kieren Cooney Governmen
Slide 8: Our values and three guiding principles shape our strategy and ambition
7 Our values and three guiding principles shape our strategy and ambition For personal use only Become Australia’s best telco for customers, shareholders, our people and the community 3. Maximise our Potential Grow by delivering high value products and services, leveraging our cost and 2. Win Smart
Slide 9: Our ambition is to be Australia's best telco
8 Our ambition is to be Australia’s best telco for customers, shareholders, our people and the community For personal use only Best for customers • Great value enabled by low-cost model • Simple, integrated telco product choices 3. Maximise • Efficient and easy customer experiences our Potential Bes
Slide 10: Today, we are highlighting key strategic initiatives
9 Today, we are highlighting 10 key strategic initiatives For personal use only Strategic initiative Presenter Current state Opportunity 1 Grow Consumer Mobile service revenue Kieren c. $1.8b service revenue >60% increase in addressable market1 2 Drive Consumer Fixed profitability Kieren Strong NBN-
Slide 11: Exiting a period of market distortion in Mobile
10 We are exiting a period of market distortion in Mobile created by competitor access to non-recurring NBN income For personal use only >$10b in NBN payments over the past five years1 … funded a period of intense price- discounting2 Telstra: 11% drop in mobile service ARPU $38 $37 $35 $36 $35 Today
Slide 12: NBN pricing creates challenges and opportunities in Fixed
11 NBN pricing continues to create both challenges and opportunities in our Fixed business For personal use only Pricing continues to rise1 … despite poor global comparisons NBN ARPU $46 208 Average monthly cost per Mbps (USD) delivered vs. median $45 $45 speed (Mbps)2 $44 $44 $43 151 More predictab
Slide 13: Solid performance momentum going into 2H FY22
12 We have solid performance momentum going into 2H FY22 For personal use only FY21 results recap Progress update Merger synergies $125-150m to be delivered one year early in FY22 Organisation simplification implemented in 1H Regulatory process under way, supported by Network expansion Announced reg
Slide 14: We are progressing our sustainability strategy
13 We are progressing our sustainability strategy For personal use only Considerable progress made on all fronts in 2022 to date • Awarded 5-star Employer of Choice rating • On track to complete Net Zero modelling by end of 2022 • TPG Foundation relaunched with new charity partners
Slide 15: Consumer
14 For personal use only Consumer Kieren Cooney Group Executive Consumer
Slide 16: Three key pillars underpin Consumer growth strategy
15 Three key pillars underpin TPG’s Consumer growth strategy For personal use only Mobile growth Fixed profitability Accelerate cross-sell Sustained Mobile growth, Maximising profitability of TPG’s Increase the number of services including leveraging TPG’s Fixed business, including per customer whil
Slide 17: TPG's strengths are well matched to consumers' needs
16 TPG’s strengths are well matched to consumers’ needs For personal use only The 2022 telco The TPG advantage consumer Cost of living anxiety Value leadership Distrust of complexity Simplicity and focus “I just want it to work” Network enhancements1 Global brand and roaming The world is opening up
Slide 18: Mobile business returning to growth in 1H22
17 Mobile business returning to growth in 1H22 For personal use only Mobile subs net adds (000s) Customer Value >1201 International travel (93) Cyclical in nature, growth may be bumpy in 2H (128) Acquisition focused on key promotional periods (358) Active churn management 5G network 2H20 1H21 2H21 1
Slide 19: Network expansion enables growth from under-penetrated markets
18 Network expansion enables further growth from under-penetrated markets For personal use only Churn reduction – addressing the largest driver of churn Metro acquisition – urban customers that value regional coverage Metro Regional acquisition – providing real choice for >4M regional customers1 Reg
Slide 20: Network expansion supports three levers of service revenue growth
19 Network expansion supports our three levers of service revenue growth For personal use only Addressable market1 Product quality Customer mix 1. Addressable market increase based on population in top 5 cities vs 98.8% total national coverage with regional network sharing (subject to regulatory app
Slide 21: Focus on fixed profitability through on-net, product and pricing mix
20 Focus on fixed profitability through on-net, product and pricing mix For personal use only 2,222k subscribers NBN 1,936k Fixed Wireless update: Fixed Wireless - c. 110k subscribers currently 80k - 160k 2022 subscribers target - 20% of base over time FTTB/VDSL/HFC Functional separation from 7 Octo
Slide 22: Opportunity to accelerate cross-selling
21 Considerable opportunity to accelerate cross-selling For personal use only Mobile 39% Fixed & 3.7m Mobile +12% Blended growth rate of Mobile services in the households YoY Fixed base, and Fixed services in the Mobile base 20% Fixed 41%
Slide 23: Introducing the Consumer Leadership Team
22 Introducing the Consumer Leadership Team For personal use only Group General Chief Marketing Group General Group General Group General Group General Manager Officer Manager Manager Manager Manager Commercial Planning John Casey Sales Fixed Products Mobile Products Customer Lifecycle & Strategy An
Slide 24: Enterprise, Government & Wholesale
23 For personal use only Enterprise, Government & Wholesale Jonathan Rutherford Group Executive, Enterprise, Government & Wholesale
Slide 25: Enterprise, Government and Wholesale Agenda
24 Enterprise, Government and Wholesale Agenda For personal use only Grow our Enterprise & Government revenue to $1b within the >$9b addressable Grow in Enterprise & Government market by FY25 Continue to expand product offering and crystallise opportunities from underutilised Unlock value in Wholesa
Slide 26: Four key growth platforms in Enterprise & Government
25 Grow in Enterprise & Government: we see an opportunity to grow through four key growth platforms For personal use only Build Enhance IoT Grow in Win small network & Mobile Enterprise business managed Private connectivity in Fixed and services and Network Mobile security solutions >25% Fixed data
Slide 27: Well positioned to grow in Enterprise connectivity
26 TPG is well positioned to Grow in Enterprise connectivity as technology transitions takes place For personal use only TPG can grow market share from ~10% to ~16%… Grow on-net fast fibre connections by o increasing penetration (no incremental capex) and o expanding footprint Fixed data Extend reac
Slide 28: TPG has built a strong reputation for delivering connectivity
27 TPG has built a strong reputation for delivering connectivity For personal use only Lifeline requires network continuity Required better support and a and resiliency robust approach in managing connectivity nationally SD-WAN solutions deployed to over 20 sites First wide scale, national SD- WAN s
Slide 29: Opportunity to win small business in Fixed and Mobile
28 The opportunity to win small business in Fixed and Mobile has been unlocked through merger For personal use only TPG with currently only 4% …has an opportunity to grow through a series of cross sell initiatives multi product customers… Near term activities Expanded opportunities to grow over time
Slide 30: Expanding portfolio to managed services and security
29 TPG will expand its portfolio to businesses and build network managed services and security services For personal use only TPG can use expanded product portfolio to grow core business Managed services brings larger opportunities Solution design Install / Deploy Comprehensive SLAs Managed Increase
Slide 31: Leveraging infrastructure for IoT and Mobile Private Networks
30 TPG is well positioned to leverage its infrastructure to enhance the portfolio with IoT and Mobile Private Networks solutions For personal use only IoT & MPN market revenue projected to grow1 Key ingredients for MPN and IoT2 TPG early wins in specific industry verticals Strong partnerships Mining
Slide 32: Enterprise, Government & Wholesale Agenda
31 Enterprise, Government & Wholesale Agenda For personal use only Grow our Enterprise & Government revenue to $1b within the >$9b addressable Grow in Enterprise & Government market by FY25 Continue to expand product offering and crystallise opportunities from underutilised Unlock value in Wholesale
Slide 33: Wholesale strategy to unlock value from mobile and fixed assets
32 TPG’s wholesale strategy aims to unlock value from its mobile and fixed assets For personal use only TPG wholesale Wholesale mobile market Wholesale fixed market residential access revenue share ($m) revenue share ($m) network penetration 397 1,634 c.400k 1% MVNOs on 16% TPG Opportunity TPG netwo
Slide 34: Wholesale Residential Access Networks enhancing go-to-market options
33 Wholesale Residential Access Networks enhancing go-to-market options for TPG in on-net fixed broadband For personal use only Copper/HFC Wholesale Residential Access Networks Apartments/Multi- Dwelling Units (MDUs) A national wholesale business Fibre for TPG’s four on-net broadband networks (FTTB,
Slide 35: Wholesale Residential Access Networks create a wholesale opportunity
34 Wholesale Residential Access Networks creating an opportunity to grow highly profitable wholesale platform For personal use only New Wholesale Residential Network New Wholesale Products Functional separation removes restrictions on expansion New Wholesale Verticals New multi dwelling units Levera
Slide 36: Introducing the Enterprise, Government and Wholesale Leadership Team
35 Introducing the Enterprise, Government and Wholesale Leadership Team For personal use only Head of General Manager General Manager General Manager General Manager Transformation, Commercial Enterprise & Wholesale & Carrier Sales & Customer Planning & Jeremy Howe Government Justin Middleton Soluti
Slide 37: Operations, Technology & Network
36 For personal use only Operations, Technology & Network Ana Bordeianu Group Executive, Customer Operations & Shared Services Giovanni Chiarelli Chief Technology Officer
Slide 38: Operations, Technology & Network Agenda
37 Operations, Technology & Network Agenda For personal use only Consolidate customer platforms and journeys Consolidating contact centres and platforms to driving operational efficiency Improve customer experience Enhancing customer’s digital journey by implementing of payment gateway Simplify tech
Slide 39: Simplifying our customer journey
38 We are simplifying our customer journey For personal use only to improve customer experience Simplification of our customer journey Discover • Initially focused on the critical stages of use, Find & buy manage & pay, and support • Creating a standardised approach to deliver Use products and servi
Slide 40: Consolidating contact centre platforms
39 Support Use Consolidating contact centres platforms into a single platform with For personal use only multiple capabilities to drive operational efficiency and flexibility • Introducing Genesys Multicloud CX to TPG and iiNet brands (Vodafone brand already enrolled) Cloud Contact Centre Platform •
Slide 41: Improving customer experience through payment options
40 Manage & pay Improving customer experience through enhancing payment options For personal use only Digital customer experience Service & care Streamlining payments experience is in progress Front-end website • Simplifying to one strategic payment partner – Braintree for all brands • Improving cos
Slide 42: Introducing the Customer Operations Leadership Team
41 Introducing the Customer Operations Leadership Team For personal use only General Manager General Manager General Manager General Manager Manila Shared Customer Operations Customer Care Customer Operations Services Support Virginia Papinyan Tarun Sharma Irwin Bustamante Jarrod Creagh 20 years in
Slide 43: Simplifying IT architecture to enhance digital experience
42 Simplifying IT architecture to enhance digital experience and drive operational and cost efficiency For personal use only Potential 2021 opportunity Simplifying 600+ <400 systems (#) • Fully-digital stack, to enable simplified customer journeys and advanced analytics Implementing Architecture bas
Slide 44: Step change in network capability enabling 4G & 5G choice
43 A step change in network capability, enabling real 4G & 5G choice to millions of Australians across both metro and regional areas For personal use only Metro: investment focus on 2021 2025 building an ultra-modern 5G 4G 5G 4G 5G network Population areas coverage coverage coverage coverage 5G roll
Slide 45: 5G rollout ahead of schedule
44 5G rollout ahead of schedule, efficiently deploying network upgrade with world-class innovation For personal use only One of the first 5G standalone core network commercially live in the world • Launched in December 2021 - all 5G sites are standalone enabled • 5G coverage and capacity more effici
Slide 46: Combined fibre and mobile infrastructure
45 Combined fibre and mobile infrastructure to provide high-quality and cost-efficient service to our customers For personal use only Spectrum • Strengthened spectrum holdings post-merger with >$500 million cash outlay avoided • mmWave may become the alternative to the current C-Band for 5G Fixed Wi
Slide 47: Introducing the Technology & Network Leadership Team
46 Introducing the Technology & Network Leadership Team For personal use only Executive General General Manager General Manager Executive General General Manager Manager Technology Demand & Technology Service Manager Technology Strategy & IT & Digital PMO Operations Network & Innovation Mandie de Vi
Slide 48: Capital Allocation
47 For personal use only Capital Allocation Grant Dempsey Chief Financial Officer
Slide 49: Disciplined capital allocation framework
48 Disciplined capital allocation framework drives our growth and return aspirations For personal use only Recurring capital management Value maximisation levers Investment Annual Enhanced Additional Sustaining Transformation Growth grade balance dividend to portfolio return to investment investment
Slide 50: Accelerated capex to enable 5G coverage nationally in 2025
49 Accelerated capex in the short to medium term to enable 5G coverage nationally in 2025 For personal use only Indicative capex profile ($m) c. 1,000-1,050 Investments in new assets and footprint, seeking incremental 922 100-200 Grow return; for example, expanding fibre network to support Spectrum
Slide 51: Balance sheet in line with targeted leverage range
50 Balance sheet in line with targeted leverage range reflecting asset portfolio optimisation and robust cash flow For personal use only Impact on borrowings of proposed Tower Assets sale1 Bank debt covenant 3.75x EBITDA Post debt reduction, TPG will have >$3.3 billion headroom relative to bank cove
Slide 52: Dividend policy to pay out 50% of Adjusted NPAT
51 Dividend policy to pay out 50% of Adjusted NPAT, derived from statutory NPAT, to reflect recurring earnings base For personal use only Calculation of Adjusted NPAT from statutory NPAT ($m unless stated) 2H20 FY21 FY22 modelling considerations Statutory NPAT 651 110 One-off items (2H22) to include
Slide 53: Enhanced portfolio management unlocking value
52 Enhanced portfolio management already unlocking value, with further opportunity ahead of us For personal use only Examples of activities already undertaken1 Ongoing focus Drive value from Integration Monetisation Strategic infrastructure of VHA and of passive approach to sharing and Smart investm
Slide 54: Summary of key financial impacts of FY22 activities
53 Summary of key financial impacts of FY22 activities For personal use only 2022 Beyond 2022 Operating earnings • Mobile subs momentum (>120k in 1H) • Consumer: service revenue growth in Mobile; improved profitability in Fixed • Fixed Wireless continuing to target 160k subs base • Roaming revenue a
Slide 55: Introducing the Finance Leadership Team
54 Introducing the Finance Leadership Team For personal use only Deputy Chief General Manager General Manager Head of Financial General Manager General Manager Financial Officer Transformation Strategy & Capital Planning & Risk & Audit Property & Sean Crowley Enda Finnerty Markets Shareholder Nish M
Slide 56: Summary and Q&A
For personal use only 55 Summary and Q&A
Slide 57: Appendix
For personal use only 56 Appendix
Slide 58: 1. Income statement summary
57 1. Income statement summary For personal use only $m FY201 FY21 Change Service revenue2 See slide 58 4,547 4,372 (3.8%) Handset, accessories and hardware2 See slide 59 916 920 0.4% Total revenue 5,463 5,292 (3.1%) Other income See slide 59 17 45 164.7% Cost of provision of telco services3 See sli
Slide 59: 2. Income statement: service revenue
58 2. Income statement: service revenue For personal use only FY21 ($m) Commentary Consumer 3,479 Primarily dependant on subscriber numbers and ARPU Subscriber numbers driven by: Mobile postpaid 1,319 - International travel normalising and recovery of longer term migration Mobile prepaid 439 - Incre
Slide 60: 3. Income statement: cost of provision of telco services
59 3. Income statement: cost of provision of telco services For personal use only FY21 ($m) Commentary Handset, accessories and hardware Revenue 920 Revenue largely offset by cost of handsets sold Periodic variability driven by new handset launches Cost 891 Other income Income 45 To include spectrum
Slide 61: 4. Income statement: operating costs
60 4. Income statement: operating costs For personal use only FY21 ($m) Commentary Employee benefits expense 377 33 Includes salaries, leave and incentives Superannuation Recurring salaries expense expected to decline in FY22 (excluding one-off impacts) Others 344 To include one-offs in FY22 arising
Slide 62: 5. Income statement: D&A and financing costs
61 5. Income statement: D&A and financing costs For personal use only FY21 ($m) Commentary Depreciation and amortisation 1,423 Network infrastructure depreciated over between 3 and 25-year useful life Excluding impact of other increases from PPE and other assets, Tower Assets and regional sharing De
Slide 63: 6. Balance sheet summary: Assets
62 6. Balance sheet summary: Assets For personal use only $m - FY20 FY21 Change Commentary Cash and cash equivalents 120 202 82 Trade and other receivables 431 476 45 Movement primarily influenced by handset receivables financing activity Assets held for sale 2 - (2) To increase temporarily at 30 Ju
Slide 64: 7. Balance sheet summary: Liabilities
63 7. Balance sheet summary: Liabilities For personal use only $m FY20 FY21 Change Commentary Trade and other payables 927 1,118 191 Movement due to timing of invoices paid Lease liabilities 92 61 (31) Other current liabilities 437 488 51 Includes government grants and other payables Total current l
Slide 65: 8. Tax position
64 8. Tax position For personal use only • Sale of Tower Assets results in TPG: Tax effected impact Tower Assets tax loss recognition/utilisation − Recognising and utilising c. $360m of capital losses c. $110m − Utilising c. $270m of already recognised ($1,590m) revenue losses1 $477m • TPG Telecom h
Slide 66: 9. Financial risk management
65 9. Financial risk management For personal use only Interest expense ($m) Debt facilities ($m) 189 2,680 2,570 149 500 960 Projections trending materially higher: at current debt levels, every Syndicated term facilities 50bps increase in interest Bilateral revolving facility rates translates to $2
Slide 67: 10. FY21 and pro forma FY20 – half yearly view
66 10. FY21 and pro forma FY20 – half yearly view For personal use only CONSUMER ENTERPRISE, GOVERNMENT & WHOLESALE Pro forma Pro forma Reported Reported Pro forma Pro forma Reported Reported $m 1H20 2H20 1H21 2H21 1H Change 2H Change 1H20 2H20 1H21 2H21 1H Change 2H Change Service revenue 1,815 1,8
Slide 68: 11. Summary of share escrow and governance arrangements
67 11. Summary of share escrow and governance arrangements For personal use only % shareholding % shareholding Shareholder name Summary of share escrow arrangements at 13 July 20201 at 23 June 20222 No sale of TPG Telecom shares in 24 month period after 13 July 2020 that would result in the Teoh Fam
Slide 69: Disclaimer
68 Disclaimer For personal use only This presentation contains certain forward-looking and unaudited information. Such information is based on estimates and assumptions that, whilst considered reasonable by the group at the date of preparation, are subject to risks and uncertainties. Actual results