The TPG Telecom Ltd (ASX: TPG) share price is rising on Friday morning.
At the time of writing, the ASX 200 stock is up 1.5% to $4.65.
This follows the release of the telco giant's half year results.
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ASX 200 stock higher on half year results
- Service revenue up 1.7% to $2,327 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) up 3.5% to $974 million
- Net profit after tax down 39.6% to $29 million.
- Interim dividend flat at 9 cents per share
- Full year earnings guidance reaffirmed
What happened during the half?
For the six months ended 30 June, TPG Telecom reported a 1.7% increase in service revenue to $2,327 million. This was driven by a 7.2% increase in Mobile service revenue to $1,121 million, which offset a 3.5% decline in Fixed service revenue (including data and internet).
Total Mobile subscribers across TPG's brands increased 64,000 during the half, bringing the total to 5.52 million. This reflects the addition of a new mobile virtual network operator (MVNO) contract with Lyca mobile in June.
Average revenue per user (ARPU) for Mobile increased by 4.2% to $34.40 per month. This was driven by plan refreshes across its premium postpaid services, which drove a 6.1% increase in postpaid ARPU to $47.30 per month.
TPG's gross margin was $1,585 million for the half, which represents a 3.9% increase over the prior corresponding period. This reflects the strong Mobile service revenue growth, as well as the growth of higher margin Fixed Wireless products, which offset the impact of intense competition in the NBN market.
And while the ASX 200 stock's EBITDA lifted 3.5% to $974 million, this couldn't stop its net profit after tax from falling almost 40% to $29 million. This was due to increased depreciation and amortisation expense from investments in network and technology capability and higher financing costs from a new tower lease agreement.
But this didn't stop the TPG board from maintaining its 87% franked interim dividend at 9 cents per share.
Management commentary
TPG's CEO and managing director, Inaki Berroeta, was pleased with the company's mobile performance during the half. He said:
The continued growth in our Mobile business reflects our focus on offering simple, great value plans in an environment of growing demand, despite slowing subscriber growth. In Fixed, our ongoing success in rolling out our Fixed Wireless products is offsetting the impact of intense competition in the NBN market.
Our cash performance in the half was encouraging, reflecting operating profit growth as well as improved working capital trends and stabilisation of capital expenditure levels with investment in the 5G network upgrade and technology capability uplifts to support business simplification having peaked.
Berroeta also revealed that the ASX 200 stock is looking to reduce operating costs by cutting its workforce. He adds:
We are taking action on operating costs, removing 120 roles from the organisation this month as we look to offset the impact of sustained inflation of recent years and deliver a flatter overall operating cost profile heading into FY25.
Guidance
In light of its first half performance, management believes it is tracking towards the mid-point of its current EBITDA guidance range of $1,950 million to $2,025 million.
This assumes no material change in operating conditions.
