TPG share price tumbles 9% on first half results

Dividends are increasing, but what about TPG's bottom line?

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Key points

  • The TPG Telecom share price is cascading lower on Friday following its half-year results
  • Shares are down 9.52% to $5.99, erasing much of the gains made throughout the year
  • Revenue and earnings failed to push meaningfully higher compared to the prior year

The TPG Telecom Ltd (ASX: TPG) share price is taking a beating today after providing its results for the first half.

Shares in the telco giant are down 9.44% to $5.99 as the market takes decisive action. Let's take a look at the important news for TPG shares.

TPG share price dumps amid uneventful half

At first glance, TPG's earnings growth might look mind-blowing. However, the 114% growth is due to a tax credit of $86 million. As such, this doesn't exactly reflect the underlying earnings growth within the business.

For this reason, the company's EBITDA metric gives a better perspective on the core business. When excluding restructuring costs, EBITDA was slightly lower, but management pointed to positive momentum.

What else happened in the half?

Importantly, TPG witnessed a strong increase in mobile subscribers during the half. Net increases came to 135,000 over the six months. Similarly, fixed wireless subscribers grew by 113,000, putting the company on track for its 160,000 target for FY22.

Furthermore, a highlight for TPG during the first half involved telco competitor Telstra Corporation Ltd (ASX: TLS). The announced plan, which was released on 21 February, would see Australia's two largest telecommunications companies enter a network sharing agreement. Since the announcement, the TPG share price has trended upwards.

According to today's release, the regulatory decision is still with the ACCC and an outcome is expected on 2 December 2022. If the deal is approved, TPG could see its mobile coverage extended to 98.8% of the population with the help of Telstra.

What did management say?

Commenting on the result, TPG managing director and CEO Inaki Berroeta said:

The simplicity and value with which TPG has always been synonymous are more relevant today than
ever – and our focus positions us to win at a time when the market is becoming more disciplined.

We are experiencing a welcome return of momentum in customer growth and transforming our network position to deliver a step change in our ability to compete in all segments, in all technologies, and across the country.

What's next?

Regarding the company's outlook, Berroeta mentioned that TPG is transitioning to a "new phase of growth". In turn, management plans for earnings momentum to accelerate in the second half.

Additionally, the targeted $125 million to $150 million in merger synergies is said to be on track in 2022. Notably, this is a year ahead of what was initially planned.

Finally, the record date for the interim TPG dividend is 14 September. After that, shareholders can expect the payment to land in their accounts on 12 October.

TPG share price snapshot

In contrast to Telstra, the TPG share price has been firing on all cylinders this year. With a return of 2.9% year-to-date, some might say it has been received with great reception. Meanwhile, Telstra shares are 2.8% worse off than at the end of 2021.

At present, TPG shares are offering up a dividend yield of approximately 2.9%.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. 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 positions in and has recommended Telstra Corporation Limited. 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 Scott Phillips.

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