The tale of gigantic Telecommunications industry and its players: TPM, TLS, VOC, AYS

  • Jun 25, 2020 AEST
  • Team Kalkine
The tale of gigantic Telecommunications industry and its players: TPM, TLS, VOC, AYS

Summary

  • The Australian telecommunications sector is in for a momentous year as a number of situations would illustrate the sector play out in 2020.
  • TPG’s shareholders gave a green signal for the merger with VHA, marking the end of two-year-long saga.
  • Telstra is delivering turnaround through an expanded footprint of 5G services while investing substantially in 5G technology.
  • amaysim is bolstering its strategic value as the largest mobile virtual network operator in Australia, with the acquisition of OVO Mobile subscribers.

The telecommunications sector is gigantic and has numerous operators that cater to the diverse customer base by offering fixed, as well as mobile services, along with various other services such as Pay TV and cloud computing.

As the world is currently overwhelmed by coronavirus pandemic, many telecom operators across Australia are adopting strategic measures to combat the crisis.

As notified in March this year, Telstra opted to defer further job reductions for next six months and provided respite to small companies and consumers who could not make the payment of their bills, by deferral of late payment fees. While Vocus has partnered with Zoom (video conferencing app) and has put itself in a sweet spot, with this timely move to meet the demand for video, and team collaboration tools on priority amid COVID-19.

Furthermore, mergers and acquisitions have been reshaping the industry landscape into a competitive playing field that we are witnessing in present time.

Positive vibrations are coming our way. Read on!

So far, 2020 has brought big moves in the telecommunications industry, as TPG cleared the final hurdle and got approval from its shareholders for a merger with VHA.

Are you geared up for 5G? Yes!

5G is transforming the telecom sector with quicker pace, low latency, and higher bandwidth. Also, various telecom operators are investing substantially in 5G. Telstra, the big telecom giant, has brought forward capex of AU$500 million from the second half of FY’21 into calendar year 2020, with the objective of increasing network capacity and accelerating 5G roll-out.

Did you read; ASX Telecom Reboot – Outshining Amid Crisis

With this backdrop, let us dive in and enrich ourselves with few of the telecom players.

TPG Telecom Limited (ASX:TPM)

TPM is an ASX-listed telecommunications company that offers various communication services to consumers, businesses, and government.

Did you read; Jubilant TPG & Vodafone Are Ready to Take on Telstra & Optus As Australia's Third Telecom Giant

mmWave spectrum issued to TPG Telecom Pte Ltd

On 25 June 2020, TPM announced that TPG Telecom Pte Ltd has been allotted 800 megahertz of mmWave spectrum by IMDA Singapore (Infocomm Media Development Authority).

This issuance of 800 megahertz throughout 26-28 gigahertz bands would enable TPG Telecom to unveil next gen 5G services in assistance of new consumer and business use cases.

As per the terms of allocation, it does not entail TPG Telecom to sustain any material upfront charges for the mmWave Spectrum.

TPG’s shareholders give a green light for the merger with VHA

On 24 June 2020, positive waves started flowing in with TPG’s shareholders voting unanimously in favour of a long-planned merger with Vodafone Hutchison Australia Limited (VHA) and the deal is anticipated to conclude by June end.

Source: ASX announcement

Source: ASX announcement

Did you read; ACCC Decides Not to Appeal Federal Court’s Verdict to Allow TPG-Vodafone Merger

Before the merger, TPG shareholders would receive fully franked cash special dividend, projected between AU$0.49 to AU$0.52/share.

Did you watch; TPG Shareholders to receive a special dividend of 49 to 62 cents/share | ASX Market Update

Also, TPG’s Singapore operations will be demerged and listed on the ASX on 30 June, as a separate company called Tuas Limited under ticker TUA.

The Company would be seeking orders from the Supreme Court to approve the Scheme on 26 June 2020. After obtaining approval from the Supreme Court, TPG will lodge the orders of the court with the ASIC (Australian Securities and Investments Commission) on 29 June 2020, thereafter the Scheme would come into effect.

TPG will then merge with VHA, followed by the name change of VHAs shares to TPG Telecom Limited. On 30 June 2020, the Company would be listed under the ticker TPG on ASX, while ordinary trading would begin from 14 July 2020.

On 25 June 2020, TPM shares were trading at AU$8.92, declining by 1.109% (at AEST 1:39 PM).

Telstra Corporation Limited (ASX:TLS), the Australian telecom giant offers services related to mobile, internet, fixed and pay television.

The 5G saga of Telstra

Telstra welcomed its 5G network in May 2019, and since then it has made continuous efforts to expand its footprint. The Company believes 2020 would be the year for 5G.

Of late, Telstra’s 5G roll-out has gained momentum with the coverage of over 50% in 700 suburbs in Australia. Moreover, the Company has its expanded 5G coverage into more of Tasmania and Melbourne.

In Tasmania, 44 suburbs have over 50% coverage of 5G, while certain parts have 5G availability throughout the whole suburb.

Further, across Melbourne, 5G has paced up with over 50% of the 57 suburbs having 5G coverage, and in few regions, 5G coverage was available across the entire suburb.

Foxtel Impairment by Telstra

On 8 May 2020, Telstra announced that it expects to recognise a non-cash impairment charge of ~AU$ 300 million. Also, this is believed to write down the value of the Company’s share in Foxtel from AU$750 million to around AU$450 million. This impairment is subject to Board review and approval of the FY’20 results.

Other updates by Telstra include:

On 17 April 2020, Telstra announced the issue of bond of ~AU$860 million, with the maturity of 10 years, strengthening the balance sheet.

Did you read; When Banks’ Dividends Are Under the Knife, Are Players Like Telstra Emerging as Winner?

On 20 March 2020, TLS published its business update related to coronavirus and highlighted several measures that were adopted:

  • Postponed further job reductions for next six months to slash underlying fixed costs by AU$2.5 billion annually until FY22.
  • Recruited thousands of temporary contractors.
  • Provided unlimited data to its broadband and mobile customers.
  • Respite given to small companies and consumers who were not able to pay their bills by deferral of late payment fees.
  • Capex of AU$500 million would be brought forward from the second half of FY’21 into calendar year 2020, with the objective of increasing network capacity and accelerating 5G roll-out.

On 25 June 2020, TLS was trading at AU$3.140, down by 0.633% (at AEST 2:08 PM).

Vocus Group Limited (ASX:VOC)

VOC is a leading integrated telecommunications player that offers specialised fibre and network solutions. The Company has a presence in the Australian and New Zealand markets, along with parts of Asia-Pacific region.

Of late, in June, the Company refinanced debt facility of AU$1,255 million and NZ$135 million, along with a weighted average term of three years and five months, providing financial stability and flexibility with the extended duration of VOC’s debt.

VOC also reaffirmed its financial guidance for FY20, though the guidance range was tightened, representing financial discipline and flexibility of Vocus amid coronavirus.

The reaffirmed Group’s financial guidance includes anticipated EBITDA (FY20) in the range of AU$359 - AU$369 million; amendment of the Net Leverage Ratio (Net Debt/EBITDA) covenant to a maximum of 3.25x at 30 June and 31 December this year, decreasing to 3.0x from 30 June next year and all periods thereafter.

Did you read; One Telecom Stock that seems to be sitting comfortably on ASX: VOC confirms guidance

Amid COVID-19, VOC partnered with Zoom on 18 March 2020 to meet the demand for video and team collaboration tools on priority, which was pretty strong as majority of personnel were working from home.

On 25 June 2020, VOC was trading at AU$2.895, decreasing by 0.172% (at AEST 2:27 PM).

amaysim Australia Limited (ASX:AYS)

AYS is the fourth-largest mobile service provider that offers both mobile services, as well as energy plans.

On 3 June 2020, the Australia based operator acquired ~77,000 mobile subscribers from My Mobile Data Pty Ltd (trading as OVO Mobile), for consideration of AU$15.8 million. This acquisition boosted the growth of AYS’ recurring mobile subscriber base to ~820,000, further, reinforcing its strategic value as the biggest MVNO (mobile virtual network operator) in Australia.

Moreover, the Company reaffirmed its FY’20 guidance for underlying EBITDA between AU$33 million – AU$39 million and hopes to close financial year 2020 within the same range.

Interestingly, the Company witnessed an upsurge of 12.50% in its share price to AU$0.360 on 2 June 2020, backed by the announcement addressing a response to recent media speculation regarding potential interest in its energy business.

Also, read; amaysim Australia’s share price: the best bet for the day with a new vision in Energy Space

On 25 June 2020, AYS was trading at AU$ 0.515, marginally down by 0.962% (at AEST 2:39 PM).

 


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