Everyone loves to hear a story about an underdog taking on the giants! In the Australian telecommunications space, TPG Telecom Ltd (ASX: TPM) is just that. The company made a lot of promises in the 2014 financial year and managed to surpass everyone's expectations.
The company provides a range of internet, phone, email and web-hosting services to individuals and businesses all around Australia, placing it in direct competition with the likes of Telstra Corporation Ltd (ASX: TLS), iiNet Limited (ASX: IIN), and M2 Group Ltd (ASX: MTU).
Huge Growth
But this didn't faze the skilled management team at TPG who managed to guide the company to a 35% increase in revenue and 15% gain in net profit and earnings per share. The company's 2014 growth far outpaced its larger rivals, however it was coming from a lower base.
Future growth is predicted to be around 20% a year for the next two years, just outpacing rival iiNet and smashing estimates for M2 and Telstra.
NBN
The NBN is going to be the next major battleground for TPG. The little innovator has begun the slightly sneaky process of installing its own fibre hardware to selected buildings that house the right mix of high margin businesses and homes. Telstra is fighting against TPG on this front as it's taking residences away from the NBN, but it looks like TPG has been given the green light to compete for now.
Analysts' estimates are that TPG is also capturing around 15% of new NBN connections. It is believed this will continue to boost user numbers and consequently revenue.
Concerns
After such a strong share price lift of over 30% in 2014 and 60% over the last 12 months, some believe that there is little value left at current prices. As uncertainty remains over the company's market share and long-term ability to roll out fibre to buildings, analysts are concerned that the chance of a significant capital loss outweighs the chance of big gains going forward.
