August 28, 2025

H1 2025 earnings call transcript

TPG TELECOM LIMITED · H1 2025

Disclaimer

TRANSCRIPT OF TPG TELECOM – HY25 RESULTS – 28.08.2025

Paul Hutton

Good morning, everyone, and thank you for joining us for our 2025 half-years results call. I’m

Paul Hutton from TPG investor relations.

To begin, I would like to acknowledge the Traditional Custodians of Country throughout

Australia and the lands on which we, and our communities, live, work and connect. We pay our respects to their Elders, past and present.

Our presenters today are our CEO and Managing Director, Iñaki Berroeta, and our CFO, John

Boniciolli. The rest of the Executive Leadership Team are also present for the Q&A session.

I’ll now hand over to Inaki.

Iñaki Berroeta:

Thanks Paul and good morning to everybody listening. Our strong 2025 first-half result reflects gains in our mobile market share, disciplined cost control and growing cash flow momentum. It also coincided with two transformational events for our company.

Firstly, the doubling of our mobile network following the activation of our regional network expansion in late January. And, secondly, the completion of the sale of our EGW fixed and fibre assets and subsequent announcement of our capital management plans.

Looking at the highlights of the period in more detail, I will start with our trading performance.

We increased our Mobile subscriber base by 100,000, gaining share from competitors, despite a fall in incoming international arrivals. Customers have responded strongly to the significantly increased mobile coverage for all of our brands. We have gained market share in both metropolitan and regional centres with domestic growth in Postpaid coming at the expense of our competitors.

We are also seeing very strong growth from our digital-first subscription brands, TPG and felix.

This droves Service Revenue growth in the period, helping to largely offset the initial costs associated with the regional network expansion and increase EBITDA. Meanwhile, NPAT was up very strongly in the period.

Improving cash flow momentum has been a key part of the TPG story for some time now - and will continue to build over coming years.

On a Pro Forma basis, Operating Free Cash Flow was up 35% on lower capex and improved working capital management, while free cash flow was up 152 million dollars.

The Board has today declared an interim dividend of 9 cents per share, consistent with our intention to pay an annual dividend of 18 cents per share in 2025. We then intend to increase dividends over time, in line with sustainable growth in profits and cash flow.

We announced earlier this month our plans to return 3 billion dollars in cash to shareholders and increase minority ownership of the Company by allowing minority shareholders to re-invest their part of that cash in new TPG shares.

We have now, in the last few days, repaid and cancelled 1.7 billion dollars of bank borrowings.

Before we move on, I would like to address the iiNet cyber incident we announced last week.

We are very sorry this occurred – and are taking ongoing steps to support any customers who affected by this incident.

Disclaimer

The unauthorised access appears to have been contained to the iiNet order management system which is used to create and track orders for new services.

That system contains email addresses for some customers and landline phone numbers, contact names and residential addresses for a much smaller group of customers. No driver’s licence numbers, ID documentation details, or bank account details were accessed as a result of the incident.

While investigations are ongoing, it appears that the number of impacted active email addresses is going to be significantly lower than the 280,000 we estimated last week.

Nonetheless, we unreservedly apologise to any iiNet customers impacted by this.

I’ll now turn to slide 6, covering our Key Financial Metrics, noting we are talking here on a statutory continuing operations basis unless we state otherwise. This was a strong result on the back of a great mobile trading performance and stronger discipline in the way we are managing cash cost expenditure.

We saw a 2.2 per cent increase in Service Revenue, led by Mobile but also with modest growth in Fixed. Gross margin was up 0.8 per cent, including the increased costs for the regional sharing arrangement, and 2.8 per cent excluding these costs. This highlights efficiencies the team has been working hard to create in recent years. Our efforts to contain growth in operating expenses has resulted in an increase in opex of just 0.6 per cent well below inflation. This is worth noting – especially in a period of increased marketing investment.

Statutory EBITDA was up 1 per cent, including MOCN cost of 26 million dollars, and significant increase in marketing spend.

On the Pro Forma guidance basis for EBITDA, EBITDA was 786 million dollars, as we disclosed earlier this month. The strong increase in NPAT included improved operating performance, lower financing costs, and a small one-off tax benefit. Return on Invested Capital was up 80 basis points to 6.2 per cent.

I would now like to talk more about our Mobile trading performance, on slide 7. We launched our expanded regional network at the end of January, and more than doubled the size of our mobile network coverage. We have significantly narrowed the mobile coverage gap that existed for decades and consumers have responded well to this step change – which is a truly once-in-a- generation event.

The subscriber growth largely offset the impact to Gross Margin of an additional 26 million dollars of costs paid under the regional network sharing arrangement since the launch.

When it comes to mobile customer growth, we have outpaced our competitors, adding 100,000 subscribers and growing share in the half. That growth has come despite much lower international student arrivals and ongoing intense competition in the market.

Now turning to ARPU. On aggregate, this was up 33 cents on the prior corresponding period, albeit 65 cents lower than the second half of last year. This reflects extensive promotional activity following the launch of the regional network expansion.

This was of course the right approach.

We only have one chance to relaunch our mobile network, and this activity was definitely a factor in us being the only MNO to report subscription growth in its premium brand in the period.

We did increase Postpaid prices by a modest amount across some services in July this year.

This will flow through in the second half of the year, so we would expect the full year ARPU trend to be positive even if subscriber growth may moderate a little.

Disclaimer

In any case, in both ARPU and subscriptions, it is important to look at the trend. Over the last three years, our Postpaid ARPU is up 14.5 per cent to 48 dollars and 51 cents, while our total

ARPU is up 7.8 per cent over the same period.

Slide 8 covers our Mobile subscriber momentum in more detail. This chart demonstrates how our cumulative growth through the year has out-paced the average of the past two years – despite a slow start from the reduction in international students.

Since the launch of our regional network expansion, net additions have been in excess of

100,000, and ahead of our internal projections. We’re on track for continued growth in the second half, although timing of our price increases in July may have some moderating impact as just noted.

International Student arrivals is a significant driver of subscriptions for TPG Telecom and particularly the Vodafone brand, which punches above its weight in this market, largely due to recognition and trust.

Looking further ahead, we expect customers to continue to respond positively to our larger network, our refreshed brands and our improving digital proposition. Pleasingly, the government has also announced a revitalised student visa program for 2026, which bodes well for TPG

Telecom, and the Vodafone mobile business.

Slide 9 describes how the market talks about Mobile subscribers – something we believe needs recalibrating. The common definition is a throwback to the early 2000s, when people had a two- year lock-in contract called Postpaid or they went to a supermarket and recharged their service as they needed on a Prepaid basis.

As you all know, there are no lock-in contracts anymore and the market has evolved into three distinct offerings.

Firstly, there is the premium market. In our case we call that Postpaid. These are customers who want multiple ways to interact and value things like international roaming, add-ons and live music access via our partnership with Live Nation. These customers typically have a longer tenure – often because they are purchasing a handset on a payment plan. While the cost to service these customers is higher, ARPU is also higher, and we generate a good margin.

Next, we have the digital-first subscription brands, in our case primarily TPG and Felix. We have historically classified these as Prepaid because the customer pays for the service ahead of receiving it. While these customers pay up front, they behave much like Postpaid customers.

You can almost think of these as the Netflix subscribers of the telco world. Each month they pay upfront for their mobile service, in what can be considered a “set and forget” manner given the essential service that mobile provides.

This is why some competitors classify these kinds of customers as Postpaid. These products are attractive for customers because they are simple, digital, and offer a great product at a great price. That’s why we are seeing the most growth in these brands. These digital-first subscriptions represent good business for us, as they are efficient to run and nimble in the market, meaning ARPU can be, lower but we still generate attractive margins.

Finally, we have traditional Prepaid. This is a value-seeking part of the segment that can be lower margin or have lower tenure but is still an important part of any telco’s portfolio. As you can see on the slide, 15,000 of our 100,000-subscriber growth in the half was from traditional

Postpaid and 55,000 was from the digital-first subscription brands. This is a very high portion of customer growth coming from recurring customers in a period when our two competitors were unable to grow share with their equivalent brands.

Turning to slide 10 now.

Disclaimer

Fixed Service Revenue increased just under 1 per cent in the period, while Gross Margin was a little less, reflecting the ongoing impact of NBN input costs. The NBN market remains very challenging with intense competition from telco and non-telco entrants, impacting subscriber numbers for larger incumbents.

We have seen some mitigation following the recent refresh of the TPG brand in late April, with promotions leading to improved subscriptions in May and June. Fixed Wireless continues to grow and now represents 14 per cent of total Fixed subscribers.

We remain the number one player in this market and will continue to optimise our offering, which delivers very attractive margins. We also grew retail subscriptions on the Vision Network, which is now owned by Vocus. We have always sold the Vision broadband service under the

TPG and iiNet brands, but we now also sell it under the Vodafone brand.

Fixed AMPU increased 83 cents or 3.3 per cent in the period, reflecting growth in Fixed

Wireless and NBN plan refreshes. Fixed remains very important to us as a product offering and is a big part of our DNA as a company.

There is very clear benefit of convergence of fixed and mobile customers – and our recent systems investments will increasingly enable us to target that opportunity.

Slide 11 covers a market-leading product development in Fixed which we launched last week.

Vodafone is now offering next generation Wi-Fi 7 modems – the first major telco in Australia to do so – delivering speeds four times faster than the previous technology, as well as strong performance across multiple devices, which can be seamlessly combined with mesh units to extend your home network even further.

As NBN speed boosts start to take effect in September, this release of this kit will play an important role in ensuring customers can get the superfast speeds they are paying for in every corner of their home.

We are confident this offering will help attract and retain customers and offset some of the marketplace dynamics we discussed on the previous slide. Being first to the market with this technology, will help to be a key differentiator for users in the high-speed market, particularly in the upcoming NBN500 space.

The four pillars on this slide remain the foundation of our company’s strategy.

Customers are at the centre of everything we do – and sadly, for many, circumstances such as financial stress, domestic and family violence, disability, or systemic exclusion can make it harder to access telco services and stay connected.

To address this, we have developed our Customer Wellbeing Strategy – a three-year roadmap to ensure all our customers, especially those in vulnerable circumstances, have fair and reliable access to essential connectivity.

In the first half of 2025, we have focused on:

Increasing our sales governance across all sales channels to ensure agents are offering products and services that meet customers’ individual needs.

Beginning work on a First Nations Customer Support Strategy to ensure we are taking culturally appropriate actions to support our First Nations customers.

Establishing new reporting and clearer data insights to better understand the experiences of customers affected by domestic and family violence, which has led to five key improvements to enhance support pathways.

Disclaimer

This is an ongoing journey as we continue to build on a customer-first strategy.

Doing the right thing for our customers is not just the right thing to do, it is also intrinsically linked to improving returns for shareholders and will always come first for our company.

My final slide before I hand over to John, reviews our progress relative to our strategic priorities and the metrics we shared with you in February.

I am pleased with the efforts of the team so far, and halfway through the year we have already achieved or are strongly on track for all our targets. Highlights to date include a 75 per cent reduction in the number of consumer plans in the market over the last 18 months. Digital sales also continue to grow and are now around 19 per cent of sales for the Vodafone and TPG brands. In the second half of this year, we will be launching a new user interface and new

Vodafone app, which will help drive further digitisation of sales and make us an easier telco to deal with for new and existing customers.

I look forward to updating you in more detail with our full-year result. John will now discuss our first half financials in more detail.

John Boniciolli

Thanks, Iñaki, and good morning to everyone on the call. Before I get into the detail, I want to be clear we have explained the basis of today’s reporting. Unless we say otherwise, the numbers we are talking about today are for statutory continuing operations, prepared on a

AASB 5 basis, per our financial statements.

That means both the 2025 half-year results and the 2024 comparative period do not include the

EGW Fixed business or fibre assets that we have sold to Vocus. Where we think it will be helpful, we have also shown the result on a Pro Forma basis. That means we have shown the impact of the new commercial arrangements with Vocus as if they had been in place for the

whole period. Those impacts are

- Firstly, the introduction of the Transmission and Wholesale Fibre Access Agreement, which we call the TAWFA for short.

- Secondly, any changes in how much we pay for residential broadband access under the Wholesale Broadband Agreement for Vision Network, noting we have always had the wholesale input costs for Vision in our Consumer business, and these costs remain in continued operations.

- Thirdly, some minor payments from Vocus to TPG for property tenancy.

Turning now to slide 15 and the income statement summary, where we have provided both the statutory result and the Pro Forma comparison.

As Iñaki has covered, Service Revenue growth was 2.2 per cent, led by Mobile. I want to go into more detail on our disciplined cost performance in the period. The cost of telecommunication services increased 4.9 per cent, as expected, because we had 26 million dollars of new costs in the period related to the regional network sharing arrangements with Optus.

A reminder

we expect these costs to be very comfortably exceeded by mobile services revenue growth including new revenue as we grow market share from a larger mobile customer network base over time. Including these costs, Gross Margin was still up 0.8 per cent in the period.

On a Pro Forma basis, cost of telecommunications services would be 29 million dollars higher – reflecting the component of the TAWFA that we don’t account as a lease. Of course, we expect to more than offset these costs through lower opex and capex over time – and, as we have emphasised, these costs are non-volumetric.

Disclaimer

That means costs do not increase as we grow customer numbers, data volumes or market share – translating to the same kind of operating leverage we would have if we still owned the assets. For short, we call that “ownership economics”.

Now turning to indirect costs or operating expenditure.

I will have a more detailed slide on this in a moment but, to summarise, I am pleased with the discipline the business has shown over the last 12 months. We told you our aim was to keep expenses in line with or below inflation this year, so restraining them to a growth of 2 million dollars or just 0.6 per cent growth is a solid outcome, particularly when you consider the incremental marketing spend.

We expect to maintain this discipline throughout the second half. We have also been very clear that we expect to hold opex growth broadly flat in nominal terms through to 2029 by removing a cumulative 100 million dollars of real costs. EBITDA was up 1 per cent on a statutory basis or

1.1 per cent excluding material one-offs at 816 million dollars.

On the basis we have given guidance for this year, which is the Pro Forma basis, EBITDA would be 786 million dollars. This compares to the first half 2024 Pro Forma equivalent of 779 million dollars, or growth of 0.9 per cent. Depreciation and amortisation expense was flat in the period as expected, while net financing costs were lower reflecting lower market interest rates.

As you can see in the Pro Forma column, there would have been a further 45-million-dollar impact of lease accounting of the TAWFA through depreciation and interest.

There was an income tax benefit of 8 million dollars in the period, reflecting the recognition of previously unrecognised tax losses, partially offset by tax on the current period profit.

Net profit after tax was 32 million dollars in the period, up materially.

Turning to slide 16 and our cash flow summary for the period, where we are again providing both a continuing operations view and a Pro Forma view. Operating Free Cash Flow was 23.6 per cent higher at 246 million dollars, reflecting a positive movement in working capital and lower capex.

The positive working capital movement mostly reflects much lower impacts from the unwind of our legacy handset receivables financing arrangement. Lower cash capex reflects lower additions as we have passed the peak years of investment to deliver the 5G mobile network upgrade and modernisation of our IT systems.

This page shows the aggregate cash impact of new commercial arrangements on the Pro

Forma basis would be 75 million dollars across EBITDA and lease costs. Free cash flow to equity was 152 million dollars higher at 103 million dollars, mostly due to non-recurrence of the spectrum payment within the corresponding period.

It seems counter-intuitive to see cash borrowing costs higher here when accounting interest costs were down in the period. That is because of timing of interest payments related to the repayment and cancellation of facilities associated with the refinancing of debt facilities in June.

The impact will reverse in the second half, when borrowing costs will of course be lower in any case because of the debt repayments, the tight pricing outcome on our recent refinancing, and the three interest rate cuts this year to date.

Disclaimer

I’ll now cover operating expense in more detail, on slide 17, in this case excluding material one- offs. On that basis, total operating expense for the first half of 2025 was 504 million dollars, an increase of 0.4 per cent.

This is ahead of our target to limit opex growth to inflation growth this year, and closer to our objective of keeping operating expense broadly flat over coming years in nominal terms. There has been strong and disciplined focus across the business to achieve this result, in particular as we increased marketing spend to the support regional network expansion and brand refreshes.

Technology expense of 126 million dollars was up just 2 million dollars. This reflected lower network maintenance and support costs – which included a direct benefit of the regional network sharing arrangement – which all but offset the impact of higher electricity costs from increased consumption as we expand the 5G network and from higher market prices.

Employee benefits expense of 174 million dollars were down 13 million dollars, reflecting the outsourcing of the Manila support centre in February last year as well as lower overall employee numbers. The Manila costs are reported in other operating expenses, which at 204 million dollars were up 13 million dollars.

This also included the increased – and very impactful – increase in our marketing investment in the period.

I expect you have noticed the increased brand presence and refreshed messaging for

Vodafone, TPG and Felix in the period. Our new customers certainly have.

To reiterate

I said in February we expected opex to be flat in real terms for the full year: that is, no greater than the rate of inflation.

This performance is consistent with our commitment to the 100-million-dollar cost reduction out to FY29, which assumes we can offset inflation if it is within the RBA’s target range of 2 to 3 per cent.

Slide 18 shows the composition of our EBITDA growth in the period, as well as the Pro Forma adjustment.

I have already covered the drivers of the 1 per cent increase in statutory EBITDA to 813 million dollars. As the slide shows, to get to our guidance basis EBITDA of 786 million dollars for the period we adjust 2 million dollars of material one-offs and 29 million dollars of Pro Forma costs.

On a like-for-like basis with the first half of FY24, this translates to an increase in guidance basis

Pro Forma EBITDA of 0.9 per cent, from 779 million dollars in the first half of FY24.

We define the 2 million dollars here as material on the basis that our expectation for the full year is an amount of more than 5 million dollars. These costs primarily relate to our capital management activities.

Slide 19 covers capex, and D&A. Trends here have stabilised significantly now we have passed the peak of our network and IT investments. Cash capex excluding spectrum payments was 473 million dollars in the period, down 37 million dollars.

This reflected a significant skew to the first half, as we foreshadowed in February, and implies second half cash capex of about 317 million dollars to get to our full-year guidance figure of 790 million dollars.

That guidance includes approximately 20 million dollars of investment to develop ground station infrastructure to support a low-earth-orbit satellite project, supporting our efforts to further improve our coverage for Australians in remote areas.

Disclaimer

We will also invest a little more in IT systems for the EGW Mobile business post the separation related to the Vocus Transaction. We are currently targeting capex of about 750 million dollars in FY26, with the target range dropping to between 550 and 650 million from FY27.

Total depreciation and amortisation expense was roughly flat between half year 2024 and half year 2025. On a Pro Forma basis, we see an additional 16 million dollars of depreciation expense related to the new TAWFA right-of-use asset. I expect depreciation and amortisation in the second half to be fairly comparable to the first half on a Pro Forma basis.

For me, the next two slides on cash flow outlook and leverage reduction might be the most important in today’s pack.

Starting on the left of slide 20, we highlight the constraints on our historic cash flow that we have now overcome. Following the VHA-TPG merger it became apparent that significant investment was needed in systems, in addition to the investment in the 5G upgrade including the costly and timely exercise of replacing banned Huawei equipment.

We went through a period of heightened capex and, at the same time took the decision to unwind a legacy handset receivables program which was much too expensive. This impacted working capital movements for three years, at the same time as we were impacted by higher borrowing costs on the merger debt, which had not been hedged.

As we moved into 2024, these headwinds started to abate, and we saw a material uplift in free cash flow. Now we are in 2025, we have some free cash flow tailwinds, including: 102 million dollars lower capex on a Pro Forma basis, 125 million dollars lower unwind from the legacy handsets arrangement, and 128 million dollars less spectrum payments.

That totals more than 350 million dollars of additional free cash flow – albeit somewhat offset by the commencement of cash tax payments in the year.

Looking ahead, we project further free cash flow growth with confidence as we grow earnings, further lower capex, flattening of the recent growth in leases costs, and lower bank servicing costs. Of course, cash tax will go up as we move past utilisation of historic revenue losses and profit grows, but the net outlook is very positive.

Now turning to financial leverage reduction on slide 21. This week we cancelled 1.7 billion bank loans, reflecting the first stage of the debt repayment component of our capital management plan. We have never lacked for headroom relative to our borrowing covenants, as the chart on the left of this slide shows.

Post the repayment, bank debt is just over 1.5 times EBITDA – and this will fall further by the end of the year when we use the proceeds of our Reinvestment Plan to pay down more debt.

More fundamentally, our strong cash flow outlook means we expect to reduce leverage further in the next two years as profit grows and we pay borrowings down. We are already very comfortably within the parameters of an investment grade BBB rating, and rating agencies can see that we will soon to be well within the BBB flat range.

Slide 22 shows more detail about our borrowings and interest costs.

In the first half of 2025, bank financing costs of 122 million dollars were lower than the prior year, as expected, reflecting easing market interest rates following the RBA’s decision to reduce the cash rate twice in the first half.

Disclaimer

We’re also showing here what interest costs would have been on a Pro Forma basis, as if we had the levels of bank borrowings we have now for the whole period.

This illustrates how lower bank financing costs will remain a driver of performance into the second half.

That’s because we now have 1.7 billion dollars less debt, the RBA has cut rates further, and we secured very tight pricing on our recent refinancing.

Lease interest costs of 59 million dollars were also lower than in the first half of FY24 but would be 87 million dollars on a Pro Foma basis due to the TAWFA.

The right-hand slide shows our debt stack.

In June we completed a successful refinancing of our 2026 maturities, extending 2.1 billion dollars of borrowings to mature in 2027 and 2028 at tighter margins.

Having made significant cancellations this month, we now have no maturities until 2027 – and we expect to pay down further facilities later this year with the Reinvestment Plan proceeds.

In any case, over the next 12 to 18 months we will be focused on extending the tenor and further reducing the concentration of our remaining debt.

With that, I will hand back to Iñaki.

Inaki Berroeta

Thanks John.

I will close by recapping our capital management intentions and our FY25 guidance, as well as the longer-term investment proposition for TPG. Let’s look at the key elements of our August 5 announcement for our capital management and liquidity plan.

We looked at how we could reward all shareholders, strengthen our financial position and increase minority shareholder ownership. We assessed all the options available and more and worked with our Board to understand the preferences of our Strategic Shareholders.

The Capital Reduction of up to 3 billion dollars is equal for all shareholders and translates to a cash distribution of 1 dollar and 61 cents per share. The targeted Debt Repayment of up to 2.4 billion dollars combines the 1.7 billion dollars of loan cancellations we completed in August as well as the targeted proceeds from the Reinvestment Plan.

Our confidence in our growth trajectory, especially our very healthy cash flow outlook, means we do not need to reduce dividends despite selling part of our business. We are targeting a

2025 dividend of 18 cents per share – the same as 2024 – and intend to increase dividends in line with sustainable growth in profit and cash flow over time.

We will consider the timing and extent to which we resume franked dividends in the future once we begin generating franking credits again.

Now turning to the Reinvestment Plan in more detail. This element of the capital management plan is novel and complex – so it takes some explanation.

The Reinvestment Plan is designed to give minority shareholders the ability to buy more shares in the Company and increase the free float.Its primary purpose is to drive an increase in minority ownership by enabling minority shareholders to reinvest their Capital Reduction proceeds in new TPG shares, at a discount.

This will offset the impact on our free float market capitalisation of the Capital Reduction and increase the proportion of the Company owned by minorities. Our Strategic Shareholders all

Disclaimer

To be very clear

this is a program to increase the free float, with debt reduction as a by-product, as we have more than enough organic cash flow to fund our growth.

We will undertake the Reinvestment Plan after the EGM.The exact mechanism of conducting the offer is still being finalised, but in effect, minority shareholders will have the option to receive their cash distribution, receive new shares, or receive a combination of both.

Minority shareholders will also be able to subscribe for more shares if they choose, via an oversubscription facility applying to any shortfall, at the same discount as their initial allocation.

Then and only then, if there remains a shortfall, would shares be offered to new investors – but there is no guarantee any discount will be applied in this case.

Final pricing terms, including the price against which the discount will be calculated and applied, will be determined closer to the time of execution at the discretion of the TPG Board.

Slide 26 restates our 2025 guidance as released on 5 August. On a Pro Forma basis, we expect

EBITDA to be between 1.605 billion and 1.655 billion dollars, which is up 2 per cent on 2024 at the midpoint. To reiterate, the Pro Forma basis is not the same as the AASB5 basis on which we are reporting statutory results.

Statutory EBITDA will be approximately 35 million dollars higher than Pro Forma as it will only include new commercial arrangements with Vocus from this month.

Transaction and separation costs related to the Vocus deal are in discontinued operations, but guidance is otherwise exclusive of material one-off impacts. As always, it is subject to no material change in operating conditions.

For cash capex, we are guiding to 790 million dollars on a Pro Forma basis. This is the previous guidance of 900 million dollars, less expenditure related to discontinued operations, plus some additional projects, as John has covered.

My final side covers our long-term value proposition. TPG is a competitive low-cost telco challenger, committed to simplicity, value and a better customer experience.

Following an extended period of transformation, there are five key elements. Firstly, in an uncertain and volatile macro-economic environment, we are exclusively domestic focused and operating in a low-risk essential services industry.

This competitive market increasingly favours the lean, customer-centric players who can be nimble in responding to customer needs. We are Australia’s genuine mobile challenger, the largest player in fixed wireless and the second largest in-home internet.

We have a strong stable of refreshed brands competing on modernised systems – and an opportunity to expand into a larger than ever addressable market. Added to that is our transformed capital structure and balance sheet, a scalable cost position, strong cash flow outlook and consistent returns from our simplified Dividend Policy.

TPG is entering an exciting, dynamic era and we have great confidence in our ability to realise our potential and grow value for shareholders over coming years.

With that, I would like to thank you for your time and open the call to questions.

Paul Hutton

Thanks, Inaki. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press *2. If you're on a

Disclaimer

Eric Choi

Hey, thanks Paul. I know you guys have pre-announced, so I'm just going to ask questions on the incremental pieces of new info we got today. So one on mobile subs, one on the digital first

ARPUs, and maybe one on border industry. Paul, do you want to go all at once or one by one?

Paul Hutton

All at once would be good. Thanks, Eric.

Eric Choi

Okay, first one, so on your mobile net adds, if we get the [inaudible], it looks like they were

20,000 to 30,000 in July and you said it was slow, but even if the remaining five months only matched that one month of July, it could imply you do 40,000 to 60,000 net ads in the second half. And is that a reasonable estimate? And I ask because industry net adds have slowed to

200,000 per half, which means if you did 40,000 to 60,000, you'd be taking 25% share of market net ads even after you lifted your prices.

The second question, just eyeballing the prices of Felix, TPG and io.net on the websites, it looks like the rough ARPUs might be in the high 20s, so can we confirm that and can we also confirm that Felix hasn't put up prices since September 23 and TPG Mobile not since August 24?

The point is, it looks like digital first prices or price increases have lagged Postpaid. So in theory, could ARPU growth for these digital first subs be higher going forward than your broader

Postpaid? And then just a third question, I know it's not you guys, but Optus just put out some slides today. It’s showing that across the mobile industry, MNOs are lifting pricing, but the Tier

2s aren't so much, and this is becoming a problem because the Tier 2s are growing in market share. So my question for Inaki and James is do you think further MNO price repair can continue without the Tier 2s lifting prices first? And if not then, and I know MVNOs are small for you guys, but how difficult is it for you guys to kind of move up pricing in your wholesale agreements? Thank you.

Iñaki Berroeta:

Thank you very much, Eric. Look, I started with the first question you had on the second half.

Our view, first I mean, we don't give any guidance on customer numbers. Second half, we are optimistic around the momentum that we have this year. I would say that our expectation is that we will be more moderate, or moderate the performance that we see on the first half. You need to see where we go, but that's our expectation probably to be lower than the first half, but it's still a good half for us in the year.

Your second question around the Tier 2 ARPUs, you make an assumption of the high 20s, I would be more comfortable telling you that it's probably a mid-20s segment for us. The reality for our different brands is that we are overall quite consistent in terms of ARPU trajectory. So if you look a little bit into how our ARPU have evolved over the years, we see that. So despite the different price moves, promotional times, I think that we are quite consistent in what we are doing. And all of this goes on the back of our proposition to the customer, which is we are giving our customers a lot more for a little bit more, and this is a proposition that customers are accepting well. They are able to see the value and they are happy to help us to grow those

ARPUs on the back of that incremental value.

And then you asked me about the price changes. I believe you are correct. So I think that last time we did something on TPG, it was probably on the Q3 last year and I think that Felix was

Disclaimer

Your third question... The other thing that I wanted to say around the Tier 2 and because everything is a bit mixed now, post-paid, prepaid, tier two MVNOs, we are looking at the market probably in a different way. Our wholesale agreements are quite small. We don't really represent much in the wholesale mobile market at this point. You'll have to ask questions related to that more through our competitors, which are much more present on that strategy. But in terms of the different propositions, we have premium brand, which is Vodafone full service, probably costly channels, but higher ARPUs, good margin.

And then a lot of our growth is coming also from digital brands, which are less ARPU, but at the same time they are using much more simpler channels. And for that reason, we are quite satisfied with the margin contribution of these brands. And I think that is a blend that works well in this market and it's a blend that we are going to continue betting on.

Your third question I answered already, is the agreements with MVNOs. First, we do not disclose that, but also if you really think about, it's not really a market where we are really present yet.

Eric Choi

That's helpful. Thanks Iñaki.

Iñaki Berroeta:

Thank you.

Paul Hutton

Thanks Eric. Our next question comes from Entcho Raykovski from Evans & Partners. Go ahead.

Entcho Raykovski

Thanks Paul. Morning. I'll ask all of mine together as well. My first question is also on slide nine where you've talked about the split between the mid-tier digital brands and also traditional prepaid. I know Iñaki, you alluded to there being a margin differential between those two tiers. In addition to the difference in ARPU, can you perhaps talk to what's the margin differential and how much of a benefit it is to get incremental subs in that mid-tier or the digital tier?

Then my second question is around, I know you spoke about this earlier in the month, but the additional Capex you're spending to support the LeoSat opportunity. Longer term, how do you see the potential monetisation? Is this perhaps a service that you can charge for? Is it going to be bundled into the base product? And specifically, then in addition to the Capex, what are the costs likely to be associated with that service given that you obviously need to use third parties to provide?

And then the final question on fixed, given you've subscribers declined in the first half, but then

AMPU is looking reasonably good, are you comfortable with that trend going forward? I'm just conscious that we've now had details of some of the small operators or the challenger brands are clearly winning share in the NBN resale market as shown by their reporting over the past week. So is TPG comfortable with that sort of dynamic and focus on profitability or do you think there comes a point at which you need to return to a subscriber trajectory? Thank you.

Iñaki Berroeta:

Thank you, Entcho. Look, the question, we don't disclose the different AMPUs on these brands.

The thing that is important to note is the differential in terms of physical channel associated to

Disclaimer

TPG Telecom - HY25 results third-party transcript - this transcript is prepared by a third party and is provided for information only. Anyone accessing the transcript should undertake with responsibility for assessing the relevancy and accuracy of the content. premium brands and the full digital-owned channel on the digital brands is really what makes the margin of these products so attractive. So I think that for that reason I said that as much as you will see ARPUs that are a bit smaller, from the point of view of the contribution, we are very satisfied with these brands, especially TPG and Felix, which during the first half have performed really well.

On the LeoSat question, this is probably the abilities of LeoSat in mobile in terms of timing, they have been a bit bold. I think that satellite fixed connectivity is a reality. Probably mobile satellite connectivity is something that definitely will be a reality, but maybe not as soon as some people are saying. Nevertheless, it's an area where we are going to be and where we want to be because it really allows something that will be very important for our business, which is to offer a

100% geographical coverage in the country.

And this is a market where geographical coverage has been a differentiator, now a lot less, and in a few years it will not be a differentiator at all. And I think that that's what this technology brings us and that's why we are so interested. The investment that we are doing this year, we will most likely be doing this year, we've hinted a bit what we would do. When we talk about the guidance on Capex it is related to the investment that we would do initially on the terrestrial part of the network, of course, because you are linking to a third-party satellite network. There is still quite a lot of uncertainty around how this will go forward. There are different ways of doing these different arrangements. And also, we are working as well with government to see how we link this as well to some of the obligations that might be introduced around the universal mobile coverage.

So all this I think is a bit uncertain in terms of quantity and timing, but I can tell you that the investment that we would do on what is required to have LeoSat service, is orders of magnitude that's smaller than what the terrestrial network uses. So we are not talking here about a massive rollout. We are really talking here about the terrestrial part of infrastructure that is required to offer a good service in the full country.

And how this will be monetised, again, this is more of a commercial strategy around what will be the different options. And I think that that goes similar to many other things that we offer. It could be run in different ways and we'll definitely not disclose that until we launch it in the market.

On the fixed question, I think that again, in this we've been quite consistent also, we have been very clear that we were looking at fixed line profitability. The market is highly competitive. We do see a number of offers in the market that probably are challenging from a point of view of sustainability and we'll see where it all ends up. I think our strategy is we are the second player in the market. It is a very important part of our business and it will continue to be a very important part of our business.

We are very excited around the changes that will come with the speed boost on NBN in

September. We have very good performance on Fibre Connect. So even though we launched the product over a year later than our competitors, we are the second player in the market on

Fibre Connect and we have now introduced a very important part of the service, which is the modem that is able to allow our customers to enjoy those speeds with the right equipment. So we are really betting on that, on higher speeds, better service, keeping good margins on the fixed business with a combination of NBN and fixed wireless and Vision and then we will play in the market as it fits. But I think we've been quite consistent. We think that we, looking at what our TPG refresh plan is doing in the last months, look like our trade three is improving versus the numbers that you are seeing there. So we think that we're in a good track.

Entcho Raykovski

Okay. Great. Thanks Iñaki.

Disclaimer

Iñaki Berroeta:

Thank you.

Paul Hutton

Thanks Entcho. Our next question comes from Liam Robertson at Jarden.

Liam Robertson

Thanks Paul. Morning team. Three from me as well. Just first one on mobile and then maybe two on the fixed consumer business. So maybe first on mobile, just follow on from Eric's comments on the digital brands around having not lifted prices for the likes of Felix for a while. I think in your preso, Iñaki described those customers as looking for great product at great price.

To that effect, just given you haven't pushed price, do you think you've got a good handle on how sensitive those customers might be to any subsequent price changes?

And then my second two questions, firstly just on iiNet, I know there's probably not much you can say, but are you able just to talk to the cyber incident and the impact on subscriber numbers across that brand and just whether you've been able to return to normal levels?

Then, the last question, apologies, a bit of a long one, but just on the consumer fixed business, I appreciate the fourth quarter was another tough quarter in terms of subscriber losses. If I look ahead though, we've got the NBN Accelerate Great program next month. I know you've launched that new modem which, if I cast my mind back to the '24 result, that was obviously one of your key concerns, so well done there. But simplistically, what I'm trying to understand is if you think you're going to be a net beneficiary of the changes being proposed next month or do you think there'll be a headwind?

Maybe if I elaborate on that a little bit, I think you've got 40% of your NBN customers on 50 megabits per second today. So in theory, if you can get a number of those customers to upgrade to what will ultimately be 500, then there probably should be ARPU benefits associated with that. Conversely though, and I know you touched on Fibre Connect before, but it looks like you've got roughly 35% of your base on some of those legacy tech types. And so those customers will be unable to access the higher speed tiers. That's obviously been a happy hunting ground for the challenger brands. So just keen to understand if you think that program will be a headwind or benefit moving forward. Thanks guys.

Iñaki Berroeta:

Thank you. Thank you very much. Look, I think that, again, we don't talk about future pricing that we'll have on Felix or any of the other brands. And it is true that Felix, we haven't changed a lot of our pricing propositions since '23. At the same time, I can tell you that the dynamic in Felix around ARPU has been quite strong. And it's been quite strong because customers, on the back of what is being offered at the different price points, have been upgrading their plans over time. And therefore the performance that we are getting on ARPU in Felix, which is very good, has been linked much more to that than to any price movement in the market. It doesn't mean that everything you need to do is through pricing. I think that we are here trying to, like I said, provide a proposition to the customer where we give them more value in exchange of a little bit more return. And how you get there, there are different avenues. And for a product like Felix, without having done any change on pricing, we have a pretty good ARPU performance.

On the iiNet, the first thing is that we take these things very seriously and we certainly apologise to our customers for it. We went very quickly into the market with very clear indications of what had happened and who was affected, but also who was not affected, to make it as clear as possible to customers very early. We contacted many, many customers in iiNet. More than half the customer base was contacted, again, with those two, the ones that were affected and the

Disclaimer

TPG Telecom - HY25 results third-party transcript - this transcript is prepared by a third party and is provided for information only. Anyone accessing the transcript should undertake with responsibility for assessing the relevancy and accuracy of the content. ones that not. What I can tell you is that we continue to do forensic analysis on the event. I can also tell you that the number of emails that were affected is materially different, materially smaller than the initial number that we gave. But we really wanted to go to these customers as soon as possible. But after the analysis that we are ongoing currently is a lot smaller and therefore we haven't really seen any impact commercially on this incident.

The third question that you have around the NBN, we believe that the speed boost, the increase of fibre is a benefit. We see it as something that allows us to give better products to customers.

At the same time we increased ARPU. We do have, like you said, several opportunities in our customer base around that speed boost. But also, we are doing very well on the new customer performance on Fibre Connect according to the numbers that NBN published. And that's something that we continue to do. A lot of the things that we are doing on our digital channels, but also on the equipment that we are providing to customers, goes on the back of making sure that we are going to be performing well on the higher speed home broadband connectivity.

Liam Robertson

Thanks guys.

Iñaki Berroeta:

Thank you.

Paul Hutton

Thanks Liam. Our next question is from Nick Basile from CLSA.

Nick Basile

Morning team. Just two questions from me. Could I just get you to clarify some of the commentary with respect to the FY25 cost base and the impact of $100 million cost-out target over the more medium term?

And then a second question just on the digital mobile subscription business. Can you talk to the link between growth in that subscriber base and your ability to manage the overall cost base below inflation and how that might evolve as you add more subscribers there? Thanks.

John Boniciolli

Okay. So John here, thanks for the question, Nick. On the $100 million cost-out to '29, what we've said is over a four-year period we would expect to, and we're aiming and targeting, for that level of cost-out simply to offset a rate of inflation within that cost base. And on the basis of that inflation rate, it's within the RBA target of 2% to 3%. We would broadly have operating costs flattish in nominal terms. And we've said that comes largely with, as we continue to simplify the business and the benefits of that, including post the Vocus transaction.

Nick Basile

That's clear. Thanks.

Iñaki Berroeta:

Yes, on the second one, I think related to digital, and I think we explained this a lot when we talk about our transformation program. So we are trying to achieve two things. One is higher reach to customers, offer a better digital experience, looking at channels that are growing very quickly, but also it's a matter of efficiency. So at the end of the day, the cost to serve through digital channels versus the cost to serve of traditional channels is materially different. And that obviously as you grow the volumes of customers that are choosing that channel as their

Disclaimer

And then related to the different agreements that we have entered on our infrastructure, John also mentioned that in the opening speech, we're looking at ownership economics. We are working with our own infrastructure in mobile, and then we are working with infrastructure agreements that still provide us that ability to maintain the ownership economics where we can couple the growth in volumes of data, but also in number of customers from those costs. So from that perspective, I think the combination of those two things is what is going to allow us to continue being the most efficient telco in the market. And I think that that's really our aim.

Nick Basile

Thanks, that's very clear.

Paul Hutton

Thanks Nick. Our next caller is Bob Chen from JPMorgan.

Bob Chen

Morning Iñaki and John. Just a few questions from me. Firstly, a follow-on to that July performance to mobile subscriber net addition. In terms of the composition of that performance, is that roughly similar to what we've seen in the first half where digital versus subscriptions are still taking the lead there?

And then just on the three categories there, when you're talking to attractive margins from that digital first subscription brands, on an EBITDA margin basis, is that segment additive or diluted compared to your post-paid business? And then maybe just a final one around where you guys are thinking of investing to improve user experience and really drive to have engagement with your customers to deliver growth. What are you coming to market with? I know you spoke a little bit about the new Vodafone app, but what are you targeting on the investment side?

Iñaki Berroeta:

Thank you. Look, in terms of the composition, I would expect, and we expect, a similar level of mix as we have seen in the first half. It is, something that you need to consider is usually the effect in the second half of the iPhone launch, so that may have a bit of an effect, but in principle

I would say that we will keep a similar type of plan. The margins, yes, at the EBITDA level and they are, I think that that's the way we see it. I don't know if, John, if you want to add more on.

John Boniciolli

Yeah, I think Inaki mentioned it earlier, whilst the premium postpaid has a higher ARPU, it does have, because it's a, I call it a full-service retail care handset experience, it does come with a higher cost to acquire and serve. The subscription mid-tier, whilst it does have a slightly lower

ARPU, it comes with a much lower cost to serve. Why? It's digital primarily, disproportionately, and that comes with a lower cost to acquire, and it also comes with a lower cost to serve. So we look at both of those segments as good profit segments for those reasons I've just outlined.

Iñaki Berroeta:

Yeah, and the second question, related to where we are doing any incremental investment in customer experience. Well, we have actually done a lot of that investment and we are at the tail end of that investment. We are now delivering a lot of the results of this investment. So when you look, for example, at the new app which will be in Vodafone but will be also in all our brands, this is now a portal that customer can use on the phones to interact with us also on the web. To be able to do that properly, that also has required a huge simplification of the, what we

Disclaimer

What we anticipate is that the delivery that we will have during next year and also the first half of maybe the following year will be quite material. We have seen a part of that and we are getting a lot of good results out of it, but in terms of the investment, is behind us, it's not ahead of us.

This is all the consumer transformation that we have done in the business around really looking at, in everything from simplification of products, consistency in customer journeys, offering good experience in all our channels, making it consistent. That's really what we look for. So I think the

Vodafone app is a good example, but there is more that will be delivered and is being delivered as we speak based on this investment that we did starting in 2023.

Bob Chen

Great, thank you.

Paul Hutton

Thanks, Bob. Our next question is from Kane Hannan at Goldman Sachs.

Kane Hannan

Morning guys, just if I look at that illustrative free cash flow chart, I might try my luck there. You do have a pretty linear growth profile of '26, '27, despite having a much more significant Capex decline in '27, which I would've thought would drive a bit of an acceleration in free cash flow there. So just obviously reading a lot into it, but am I missing anything there in terms of the rate of EBITDA growth, the cash tax impact coming through that explains why it's a more linear profile you put in that slide?

John Boniciolli

No, I'll just make a couple of points on cash flow and I think very consistent with our comments over prior reporting periods. I think you can see the strong cash flow outlook that has been delivered over the last 12 months, is being delivered in the first six months of this financial year, and will be delivered in half two.

Let me just talk about half two for a moment. If you take the midpoint of guidance, you'll have a improving EBITDA, you'll have a reduction in half two versus half one on cash Capex. You'll still have the handset receivable online benefit. It won't be quite as large, probably about 30 million less. And then one we haven't spoken about too much, although it's, well, broadly we've spoken about, is we've paid down 1.7 billion of debt and therefore you'll get the interest benefit of that as well in half two, noting also how that flows through to cash. So I just want to make those points. I think second point, as the chart has noted, it is illustrative only and it's not to scale.

Kane Hannan

Yep, that's fair enough. In terms of the $550-650m target and the budgets you put out there for

'26 and '27, talk me through the assumptions you've made around 5G-Advanced for how I think about 6G coming through. I know that's obviously going to be later in the decade, but do I think about that $550-$650 million as a trough Capex number that then potentially grows with inflation beyond that?

John Boniciolli

Yeah, look, as we've said now over quite a bit of time, this $550 - $650 million range is something we've been talking about for over 12 months. Why are we confident on that? It's less about what you need to believe in the future. It's more about why Capex has been higher and why we're past the peak of Capex now. To be really clear, one, the IT modernisation of

Disclaimer

TPG Telecom - HY25 results third-party transcript - this transcript is prepared by a third party and is provided for information only. Anyone accessing the transcript should undertake with responsibility for assessing the relevancy and accuracy of the content. business simplification. We're past that peak, Inaki referenced that earlier. And secondly, unlike a usual 4G to 5G upgrade, we've had the swap out of the Huawei equipment. That 5G upgrade is very well progressed. Yeah, we've got a bit to go and that's why we're confident on the $550 to $650 million range. So it's about why it's been higher in the prior period rather than necessarily what you need to believe needs to come down for some sort of transformational change in the future. As far as 6G's concerned, that's in the early the next decade, so it's really not in that forecast period we've been talking about.

Kane Hannan

Is there anything for 5G-Advanced?

Iñaki Berroeta:

5G-Advanced, Kane, will be included in that Capex envelope. So when we say a $550 to 650 million, we're looking at these things. It's very early to talk about 6G. We're probably a good five to seven year until that investment comes in full. There are a lot of questions around what it will be, but there is also quite a lot of information around 6G being a much minor change in terms of what is going to be offered.

I think that a lot of the vendors of equipment like Ericsson and Nokia, with what we look about the roadmaps, we're not talking so much about a transformational type of investment but it's much more around efficiency and also the next evolution of mobile goes very much in hand with software not as much as it used to be before, hardware. So, I do think that probably the next generations of technology would not require as much as we have seen in the past, but the most important thing here is that we're not going to have to replace Huawei ever again. So the Capex that you saw in previous years had a component that is really a one in a lifetime.

Kane Hannan

Yep. That's helpful. Thanks guys.

Paul Hutton

Thanks, Kane. Our next question comes from Roger Samuel at Jefferies.

Roger Samuel

Oh, hi. Morning guys. Two questions from me please. First one, you've done a great job in reducing the number of consumer plans and IT applications, but it looks like you still have a bit more to go for IT, going from 470 apps to more than 250 by FY29. So my question is how do you ensure that you can minimise any potential disruption, for example, with your billing systems or with the order management system that we have seen with iiNet? And the reason why I'm asking is because if you look at Telstra, they were impacted when they migrated customers to a new technology stack.

Question number two is on consumer broadband with NBN speed boost coming. I can see that your fixed wireless offering can only provide speeds up to 100 megabits per second. So do you think that the value proposition of fixed wireless will be less compelling, especially in areas where the speed boost is available? Thanks.

Iñaki Berroeta:

Thank you, Roger. Look, the first question that you have around the reduction of plans, and consolidation of journeys and ultimately the simplification of the IT stack, the thing that is important is that the first thing you do is simplify the legacy and also build on the new stack. In our case, we choose one of the IT stacks that we had and we built on it. So it could be the single common platform for all the brands. During this year and the coming year, there is a lot of

Disclaimer

So we'll want to make sure that we do that properly and that really has a big part of the organisation working on that process. We've done migration of customers already and we will continue to do that during '26. And yeah, there is a very strong plan. That is not just a IT plan, it's really very much a commercial plan around that migration. And we have done some very strong steps in '25 and we continue to work on that, and also to make sure that we put the measures to minimise, like I said, the customer impact.

In terms of your question on the fixed wireless, our view is that fixed wireless, and we've been quite consistent on that, it's not the product for everyone but it's a really good product, and it will remain a really good product, and it will be a product that will, over time, increase the speed.

But fixed wireless will never offer the performance of a fibre connectivity. What happened is that in the market there is always going to be people that will not be looking for that type of performance. And obviously, fixed wireless offers a solution that is cheaper and also at the same time a solution that is very flexible because you install it yourself on the same day. It's quite convenient and reflective of that is even though in this market you can buy a one gig broadband at your place, we still have good sales of our fixed wireless product and we think that that will continue.

Roger Samuel

Okay, thank you.

Paul Hutton

Thanks, Roger. The next question is from Fraser McLeish from MST Marquee.

Fraser McLeish

Thanks. I'm conscious of the time in this call, so I'll keep it snappy. Just two quick ones just,

Inaki, one of the advantages I guess of MOCN is supposed to be in lowering churn, and I don't think you've given churn numbers, but can you tell us what you're seeing there? And then just one, a couple of investors clients have been asking me about whether you're going to underwrite the reinvestment plan. Just if you can confirm that please. Thanks.

Iñaki Berroeta:

Thank you, Fraser. On the first question, the answer is yes, we have seen a lower churn, but we are not disclosing that. Obviously, as we said, so let's say that we have a way to analyse the reasons for churn. In our case, the network performance or more than performance really, coverage, has been something that has weighed on that churn, and that's something that now has improved dramatically. So obviously we've seen some improvements. There are other parameters on churn, so it's really not so easy to discriminate what comes from where, but we are quite satisfied with the performance that we have received from the MOCN, to that respect.

And in terms of the underwrite, look, I think we'll give more details around our capital management plan. We do have the option to do that, but we also don't think that that will be necessary.

Fraser McLeish

Great. Thank you.

Paul Hutton

Disclaimer

Thanks, Fraser. Our next question is from Ware Kuo at Bank of America.

Ware Kuo

Morning. Just one question from me, is how do we think about the growth of direct mobile gross costs going forward? So it's been an area where you've constrained or reduced costs in this bucket year-on-year in the past, and you've mentioned that the cost are not going to be volumetric in nature. So going forward, do we assume that a component of that doesn't grow, year-on-year? And then for the rest, do we think that this cost bucket on an absolute basis is just going to grow at CPI?

And following on from that, is there any further opportunities of cost out in direct gross costs in mobile? Thanks.

John Boniciolli

Yeah, so we have said that the direct cost as it relates to the MOCN is non-volumetric. We've also said in the past that there is a CPI link, and what we've also said is there's part of that that is variable, related to the 5G rollout of that MOCN network. So there is growth in that cost for the reasons I've just outlined. So that is point one. Point two, I think you've seen in the last 12, 18 months, the strength in our cost management, and that applies to all elements of the cost line, whether it be third-party spend in Opex, third-party spend in direct costs, and whether it be how we manage hardware margin as well. So we're very focused, as Inaki said earlier, on being the most efficient telco in this industry and maintaining that, and that's, we think is important. So you'll see us continue to have that focus as we manage profitability.

Ware Kuo

Great, thank you.

Paul Hutton

Thanks, Ware. Our final call is from Andrew Gillies at Macquarie.

Andrew Gillies

Thanks, guys. Just two quick questions. It sounds like you're doing some attribution on postpaid churn. I appreciate you don't disclose the absolute number, but can you give some sort of indication of how much the network expansion has driven that churn reduction, say, verse elevated promotional costs or marketing costs? And then, is there any update you can provide on the potential for a new handset receivables financing deal? Thanks.

Iñaki Berroeta:

Yeah, Andrew, I think that related to the postpaid churn, like I said before, it's difficult for us to clearly define what comes from where. What we can tell you is that our churn trajectory has improved, but also we think that the coverage component that we have introduced is something that will help us even further improve in the long run. I will ask John to ask you to answer the handset receivable question.

John Boniciolli

Yeah, look, we've been talking about this handset financing work effort for quite some time. I appreciate that we have made tremendous progress. We're very confident in getting to an outcome there, but obviously I'm not providing a conclusion of that today because it simply isn't concluded. But we're very pleased with the progress we made, and we hope to provide an update to the market reasonably soon.

Andrew Gillies

Disclaimer

Thank you.

Paul Hutton

Thanks, John. Thanks, Inaki. That concludes our call for today. Thank you very much for joining.

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