Newly-merged TPG Telecom (ASX:TPG) posts $83M half-yearly profit

• Recently-merged TPG Telecom (TPG), which is the combined entity of Vodafone and TPG Corporation, released its first half-yearly results as a new entity today
• The company managed to post an $83 million half-yearly profit, which is a 154 per cent increase on its $153 million loss from the same time period last year
• Still, the onset of COVID-19 meant TPG had to close a third of its retail stores between April and June and missed out on some important international roaming margin
• Of course, while the news of the coronavirus blows is bleak, the fact that TPG still managed to post a profit was received well by investors
• TPG shares gained 2.74 per cent today to close worth $7.50 each

Recently-merged TPG Telecom (TPG), which is the combined entity of Vodafone and TPG Corporation, released its first half-yearly results as a new entity today.

The results, however, are mostly from Vodafone operations; the companies only formally merged in late June, so today’s results include a full six months’ worth of results from Vodafone but just four day’ worth of results from the original TPG.

For the sake of clarity, all further mentions of ‘TPG’ will refer to the company formerly known as Vodafone Hutchinson.

The merger was in the works for over a year but was made all the more difficult by the onset of the COVID-19 pandemic. Still, despite the coronavirus, TPG managed to post a 154 per cent increase in profit compared to the same time the year before.

In the first half of 2019, the company reported a $153 million loss. In the first half of 2020, the company reported an $83 million profit.

This comes despite a 12 per cent drop in half-yearly revenue, coming in at $1.5 billion at the end of June 2020 compared to the $1.7 billion at the end of June 2019.

COVID blows

TPG said while the telecommunications industry has proven more resilient than other sectors over the COVID-19 pandemic, this doesn’t mean the company got away scot-free.

The company said global travel restrictions have had a major impact on revenue and earnings before interest, tax, depreciation and amortisation (EBITDA). The lack of travel caused an 80 per cent reduction in roaming margin, a 30 per cent decline in prepaid connections, and a 20 per cent decrease in post-paid connections.

Moreover, TPG had to close roughly one-third of its retails stores between April and June and struggled to connect new customers when its call centre capacity was temporarily reduced because of lockdowns in India.

The company said operations have now returned to almost full capacity, but it is still feeling the effect of higher costs due to changes in the way it delivers its service.

Of course, while the news of the coronavirus blows is bleak, the fact that TPG still managed to post a profit was received well by investors.

TPG shares gained 2.74 per cent today to close worth $7.50 each. The company has a $13.74 billion market cap.