Profit plunge: TPG Telecom (ASX:TPG) share price slides 7% on full-year results

Why are some investors selling TPG shares today? Let's take a look…

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Key points

  • TPG share price is sinking 7% today
  • NPAT fell nearly 11%, while revenue also dropped 3%
  • Despite this fall in profit, TPG increased its dividend to shareholders 

The TPG Telecom Ltd (ASX: TPG) share price is in the red today on the back of the company's full-year results.

At the time of writing, TPG Telecom's shares are swapping hands at $5.46 apiece, a 6.98% drop. In comparison, the S&P/ASX 200 Index (ASX: XJO) is down 2.68%.

Let's take a look at what the telecommunications giant reported today.

TPG share price falls as profits slip

Highlights of the company's full-year (FY21) results include:

What else happened in the half?

Investors have not responded well to the results, judging by the TPG share price. However, TPG declared a boost in its dividend to shareholders despite a fall in profit. The total dividend declared for 2021 is 53% of the adjusted NPAT.

Service revenue declined 4% to $4.4 billion due largely to a drop in mobile subscribers. This was partly offset by a growth in fixed broadband customers.

EBITDA dropped more than 3% due to the "delivery of efficiencies" including labour costs.

Free cash flow improved to $410 million due to less expenditure, lower interest costs, and working capital efficiencies.

In total, TPG reported 5.02 million mobile customers, a 4% drop on FY20 due to COVID-19 travel restrictions. However, since November 2021, the company has seen a boost in mobile subscribers as international travel returns.

Fixed wireless broadband customers have jumped 1.2% to 2.22 million. Since 31 December, TPG has been building on this momentum, adding 80,000 new customers to its 4G and 5G home broadband services.

TPG delivered what it described as its "best ever network" in 2021, rolling out 1,000 5G sites that can be accessed by 85% of the population.

The company also achieved $71 million of cost synergies following its merger with Vodafone Australia in 2020.

Management commentary

Commenting on the results which have seen the TPG share price tank today, chief executive officer Inaki Berroeta said:

2021 was a year of significant progress as we unified our operations and demonstrated strong operating and financial discipline to navigate the challenging COVID operating environment and position ourselves strongly for improving market conditions.

We have been encouraged by the uptick in mobile customer numbers as international travel returns and we are optimistic about the year ahead as COVID impacts lessen.

We are targeting to more than double our fixed wireless base in 2022, with our offering providing customers with a high quality, great value alternative to the NBN.

What's next for TPG?

TPG has recently signed a mobile operator core network agreement with Telstra Corporation Ltd (ASX: TLS) which will provide TPG with access to 3,700 of Telstra's mobile network assets.

The telco plans to roll out its 5G network to 1,000 more sites in 2022. TPG is also targeting at least 160,000 fixed wireless subscribers in FY22. A strategic review of towers and rooftop infrastructure is close to completion.

The company has a goal to deliver more than $1 billion in enterprise revenue by the 2025 financial year.

TPG plans continue to improve cost synergies following its merger with Vodafone Australia. The company is targeting $125 million to $150 million of total merger synergies in 2022.

Commenting on this process, Berroeta added:

Having executed strongly against our objectives in 2021 amid challenging conditions, we are now in a strong position to achieve our full potential as an integrated full-service telecommunications company in coming years.

We are confident of delivering value from targeted growth initiatives, smarter asset utilisation and further simplification of our business as headwinds lessen and underlying momentum improves in 2022

TPG share price summary

The TPG share price has dived 22% in the past 12 months while it is down 7% year to date.

For perspective, the benchmark ASX 200 index has returned around 3.5% over the past year.

TPG has a market capitalisation of about $10.9 billion.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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