February 27, 2026

FY 2025 earnings call transcript

TPG TELECOM LIMITED · FY 2025

Disclaimer

TRANSCRIPT OF TPG TELECOM – FY25 RESULTS – 27.02.2026

Paul Hutton

Good morning, everyone.

This is Paul Hutton speaking from the TPG Telecom investor relations team.

Thank you for joining us for the presentation of our 2025 full-year results.

We 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 CEO, Iñaki, will present our results highlights and strategy update.

Our CFO, John, will then present a detailed review of our financial performance.

Iñaki will then discuss our outlook before we open for Q&A.

Iñaki Berroeta:

Thanks, Paul, and good morning, everyone.

2025 was a milestone year of transformation, simplification and – most importantly – the delivery of our best ever network for customers.

We launched the regional network sharing arrangement with great success.

We completed the sale of fibre infrastructure and EGW Fixed operations.

And we used the proceeds to execute capital management initiatives, delivering a stronger and much lower risk financial position.

It was a year of market-leading trading performance in our core Mobile business despite a significant slowdown in the broader market.

Our subscriber growth accounted for the majority of the net adds in the industry as we increased our market share, led by our digital-first subscription brands.

On top of this, we are delivering cash flow and ROIC improvements.

This is driven by more infrastructure sharing and efficient asset utilisation, by the cost benefits of continuous business simplification, and the conclusion of the transformational investment cycle of recent years.

Customer wellbeing is our priority.

Every day, our networks are essential to how Australian’s live, work and connect.

We are committed to investing to ensure we are there when our customers need them.

Our industry needs regulatory policy that incentivises that investment, not stifles it.

Finally, we are providing guidance for 2026 for continued EBITDA growth, driven by Mobile Service Revenue growth and operating cost discipline.

We are positioned strongly to deliver shareholder value in 2026 and the years ahead as a more streamlined and focused business.

Our strategy has four pillars

to run networks smarter, invigorate brands and services, make it easier for customers, and become faster, simpler and stronger.

As a result, customer and network experience is thriving – and customers are responding positively to our more distinct, simpler range of brands and plans.

We are delivering growth with a more controllable, predictable and de-risked cost base.

We are confident these trends will continue in 2026.

Disclaimer

It has been a journey of material investment to transform our network, platforms and capabilities, delivering a simpler, more dynamic business.

We are seeing the results and we expect to see ongoing improvement in the years to come.

Nowhere is transformation more apparent than in customers’ network experience.

Let’s start with the physical changes we have made.

The regional mobile expansion doubled the area we cover, increased our national sites by 35 per cent and lifted our population coverage to 98.5 percent.

In addition, 81 percent of the sites in the TPG-owned network are now converted to 5G, covering 91 percent of the population.

Third-party research tells you there is increasingly little difference between networks in Australia.

TPG Telecom delivers ours with a significantly lower cost structure.

Network consideration among non-customers is also rising and, importantly, churn is down for both Consumer and

Business customers.

This churn reduction was one of the main objectives of the regional sharing arrangement, and we are achieving it.

Consistent delivery of network and customer experience means consistent delivery of financial results.

Simply

we are winning a growing share of the Mobile customers available, at higher ARPU, so we are growing

Mobile Service Revenue consistently.

Leveraging our lean cost base, we can then grow profit – offsetting the impact of initiating the regional sharing arrangement in the year.

And the way we are managing our assets and our capital is delivering a growing cash yield for our shareholders from a transformed financial position.

This year we returned more than 3.3 billion dollars to shareholders, including our ordinary dividend, and de-risked future profit by paying down 2.7 billion dollars of debt.

Dividends, now franked at 30 per cent, are targeted to grow from here in line with sustainable growth in profit and cash flow.

We will move towards increased dividend franking over time.

Let’s now look at Mobile performance in more detail.

This was a very strong result as we consistently increase our share by providing the products that customers want across a deliberately differentiated multi-brand portfolio.

Our expanded regional network has unlocked competition and choice in parts of the market that were previously underserved.

That impact is clearest in our digital first subscription brands, where latent demand for simple, valueled plans has translated into strong subscriber growth.

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Mobile Service Revenue was up 4.2 percent to $2.423 billion dollars, with Gross Margin up 1.7 per cent to 2.002 billion dollars.

Excluding the costs of the regional sharing agreement, which we expect to more than make up through revenue in future years, Gross Margin was up 3.6 per cent.

Growth accelerated in the second half, reflecting the timing of plan refreshes and the strong momentum in our digital- first subscription brands.

We always said 2025 would be about focusing on market-share growth off the back of the expanded network, but we still delivered solid growth in ARPU.

Disclaimer

The greatest growth at 10.7 percent was in the digital-first subscription brands – Felix, where we see customers upgrade to higher-tier plans using the app – and TPG and iiNet, where we saw the flow-through benefit of plan refreshes from late 2024.

We recently undertook a tranche of price increases on some back-book plans in Vodafone Postpaid, as well as in

TPG and Felix Mobile.

The digital-first subscription segment also led our subscriber growth, with 113,000 net adds, while there was also solid growth in traditional Prepaid segment.

Our total subscriber growth of 228,000 customers or 4.1 percent was approximately three times Australian population growth in 2025 and higher than the other two MNOs combined.

We are winning a record share of customers relative to our competitors – and that’s against a reduction in international migration, where we are historically strong.

Vodafone continues to play a critical role as our full service brand, anchored by handset offers, international roaming and exclusive offers and partnership like Live Nation.

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At the same time, our digitalfirst subscription brands are capturing growth where the market is expanding fastest.

This portfolio approach allow‑s us to grow share, protect margins and follow customer demand – and it is working.

Now turning to home broadband.

Gross Margin and AMPU increased in FY25, supported by mix shift to onnet Fixed Wireless and highertier NBN plans.

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The market remains structurally challenged, but our 5G Standalone launch should expand our Fixed Wireless addressable market by at least 15 percent.

That will support base growth in FY26.

Our subscriber numbers in NBN were again down year on year, reflecting the ongoing impact of non-telco players and aggressive volume-driven resellers.

This decline slowed in the second half.

There has been considerable fragmentation in the NBN market, but recent industry deals suggest signs of maturation.

Our role in that will be to remain disciplined: offering simple, great-value plans, focusing on the convergence value of

NBN, while continuing to grow Fixed Wireless.

Our customer wellbeing strategy is integral to our success and to how we build long-term trust with customers.

We have an industry-leading approach in areas like domestic and family violence, First Nations support, accessibility, financial hardship and responsible selling.

We are also leading the industry with the introduction of customer wellbeing specialists across our stores and in our main contact centre in Hobart.

These specialists are trained to support more vulnerable customers, helping ensure the right outcomes for them and for our people, and we are extremely proud of the work they are doing.

I will close on the regulatory environment before handing to John.

We support policy settings that sustain network investment and competition.

For spectrum renewals, we’re advocating efficient, revenuelinked structures and renewal timing aligned to licence dates, rather than large up front payments that can divert capital from network investments and improving customer experiences. ‑

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I will now hand to John.

Disclaimer

John Boniciolli

Thank you, Iñaki, and good morning everyone.

FY25 marked a year of structural change, with a simpler asset base, materially stronger cash generation and a significantly strengthened balance sheet.

My first slide shows the positive trend across our key financial metrics.

I will be talking about Continuing Operations unless I say otherwise.

When I talk about Pro Forma, that’s as if the new commercial agreements with Vocus were in place for the whole year – which provides the most relevant baseline for FY26.

Service Revenue continues to grow despite slowing industry growth, and was up 2.2 percent to 4.179 billion dollars.

This comes off the back of strong Mobile subscriber growth across the Consumer, Business and Wholesale segments, and ARPU growth.

Gross Margin and EBITDA were both up despite the first-year costs for the expansion of our regional mobile network.

As we noted when we gave guidance for the Year, those costs came ahead of the additional revenue growth we are seeing from the bigger network.

Adjusting for those costs, Pro Forma Gross Margin would have been up 3.6 per cent, with growth of 4.2 per cent in the second half.

EBITDA, on our guidance basis, which is Pro Forma and excluding material one-offs, was up 2.0 percent to 1.637 billion dollars, above the midpoint of our guidance range.

That would have been 5.7 per cent without the regional expansion costs and, again, this was stronger in the second half at 6.8 per cent.

Our EBITDA performance also highlights discipline in operating costs, which were flat, excluding one-offs associated with capital management and restructuring.

Underlying NPATA and EPS, which are Pro Forma and exclude material one-offs and customer base amortisation, were 69 million dollars and 3.7 cents respectively.

Turning to dividends, this slide shows ordinary dividends declared of 18 cents per share for the year, and that’s now franked to 30 per cent for the final dividend.

We declared 27 cents per share in the Year including the special dividend.

ROIC was up a solid 0.66 percentage points to 5.42 percent on a Pro Forma basis, primarily driven by greater capital efficiency.

Through the Vocus transaction, we sold highly depreciated assets with very little growth.

As a result, we expect strong growth in ROIC because we retained our higher growth business just after the high point in its investment cycle.

Cash flow outcomes in the year were extremely strong.

This reflects proceeds from the Vocus Transaction and the new handset receivables financing program, as well as lower capex, spectrum and borrowing costs.

My next slide is a profit summary.

A quick note on hardware revenue, which was up 5.6 percent, while we maintained overall hardware margin.

That’s consistent with our objective to retain our natural share of handset customers, and is positive for the lifetime value of our Postpaid base.

I also draw your attention to operating costs, halfway down the table, which at 1.031 billion dollars were up just 0.5 percent.

That’s a strong outcome against our objective to keep opex below inflation in FY25, given the average trimmed mean

CPI was 3.3 per cent.

We are on track to deliver our target of 100 million dollars of real terms cost savings in the four years to FY29.

Disclaimer

Savings reflected the benefit of lower network maintenance and support costs, a lower FTE base as we deliver continuous business simplification and IT modernisation.

That is with a very deliberate increase in marketing cost.

I am very pleased with our track record on operating cost discipline.

Turning to depreciation and amortisation, the modest Pro Forma growth results from an increase in the depreciable asset base due to peak capex reached in 2024.

We expect similar D&A growth in FY26 on a Pro Forma basis.

Now turning to EBIT and financing costs, where it’s important to understand the difference between statutory

Continuing Operations and Pro Forma.

Pro Forma shows the impacts in both direct costs and lease depreciation and interest of the new commercial arrangements with Vocus as if they’d been there all the time.

Continuing Operations includes these impacts only for five months in FY25, with obviously no such impact in FY24.

The FY25 Pro Forma EBIT growth was 3.8 percent with total net financing costs down 0.9 percent.

The financing cost run rate for FY26 will of course be much lower.

That’s firstly because bank borrowings are now materially lower.

It’s also because of the new handset receivables program, on which financing costs for the back book sale were recognised upfront in October, whereas we only got the one quarter of savings in FY25 from the bank borrowings we repaid.

It’s also important to note there were income tax credits in FY25, arising from R&D tax credits and previously unrecognised tax losses.

Now turning to cash flow, where momentum is very positive.

This slide includes both Continuing and Discontinued Operations – as that’s cash that was available to shareholders.

Growth of 25.5 percent in cash flow from operating activities reflected the proceeds in working capital of 687 million dollars of the new handsets receivable financing.

This more than offset the loss of earnings from the assets sold to Vocus from August onwards and the commencement of payment of cash tax.

Operating Free Cash Flow almost doubled to 1.291 billion dollars, reflecting the additional benefit of lower capex.

Free Cash Flow to Equity was 5.751 billion dollars, enabling the extensive bank borrowings repayment and capital return in the period.

Please note the subordinated note component of the handset receivables financing, which is the part that stays on our balance sheet, comes through investing cash flow.

So in net terms, the impact on our Free Cash Flow to Equity of that program was 594 million dollars.

From here, the year-to-year impact of the handset receivables financing program should not be material.

Of course, this all depends on the overall handset market and supply chain conditions.

In summary, while this year’s one-off Vocus transaction and handset proceeds are not recurring, the underlying business is now generating materially higher recurring cash from a smaller asset base.

Momentum is projected to be strong from expected growth in service revenue, continued tight cost control, lower capex and much lower borrowing costs.

The balance sheet changed a lot in 2025, delivering an efficient asset profile on which we expect to grow returns over time.

The highlight of course is the material reduction in our bank borrowings from 4.1 billion dollars to just 1.361 billion dollars, significantly reducing our financial risk.

Trade and other receivables were down as a result of the handset receivable program.

Disclaimer

PP&E and intangibles were down almost 4.4 billion dollars on aggregate reflecting the transfer of assets to Vocus or derecognition of non-cash intangibles such as goodwill.

The increase in deferred tax assets in the period may seem counter-intuitive, as we utilised historic revenue losses against the gain on sale for the Vocus transaction.

However, outside of normal movements, we disposed of a net deferred tax liability and recognised a new net deferred tax asset associated with the new fibre access agreement with Vocus.

This was also reflected in the increase in right-of-use assets and lease liabilities.

I will now cover cost management.

This is about structural cost removal, not short-term restraint or deferral, supporting operating leverage as the business grows.

Direct telco costs have increased because of the regional mobile network sharing with Optus and the non-lease component of the fibre network access with Vocus.

But these make up less than 10 per cent of the run rate of our direct telco costs and they are non-volumetric – they won’t increase as we add customers or data volume.

So we have operating leverage as we grow and we avoid opex and capex over time.

The majority of our direct costs remain NBN costs, which we manage tightly.

Opex is a positive story as I have already covered, and we have good momentum to remove 100 million dollars in costs, in real terms, by FY29.

Inflation has of course been running ahead of the RBA’s target of 2 to 3 per cent, so if that persists, our opex may still go up in nominal terms.

Turning to capex, the Pro Forma outcome in additions terms was 771 million dollars and we expect that to be about

750 million dollars this year.

Our targeted capex range remains 550 to 650 million dollars from FY27 onwards, although we expect to be at the upper end of that range in FY27 itself.

That’s because the IT transformation will be largely complete after this year, but we still have about 1,000 Huawei sites to change out.

Additional mobile network infrastructure sharing would result in even greater capex efficiency, benefiting customers across the industry.

My next slide covers financing costs, where the change reflects the strengthening of our financial position.

Net bank borrowing costs were down 37.8 percent in FY25 due to debt repayment and holding cash prior to the capital return, and will be materially lower again in FY26.

If you assume a cost of borrowing of 5.5 to 6 per cent, you would forecast FY26 bank financing expense of about 80 million dollars using our net bank debt today as the base.

Also note we are 66 per cent hedged.

Financing costs from the handset receivables program were 95 million dollars in FY25, on about 900 million dollars face value sold due to the size of the back book.

The average of the two quarterly sales since would suggest annual sales of about 600 million dollars face value in

FY26, so annual financing costs of this program will not be as high in FY26.

As noted earlier, this will depend on overall handset trading and supply chain conditions.

On a Pro Forma basis, lease financing costs would have been 175 million dollars in FY25 – and we expect those to be broadly flat year-on-year in FY26.

All of the above is of course subject to interest rate movements.

But our current expectation is that financing costs will be roughly 100 million dollars lower in FY26 than the FY25 Pro

Forma total of 426 million dollars.

Disclaimer

My final slide covers our medium-term outlook for cash flow and leverage.

The trajectory was positive in FY25, and we expect momentum to continue to build.

The left-hand chart shows our Free Cash Flow to Equity excluding the 4.7 billion dollars in proceeds from the Vocus sale.

We have also shaded out the 594 million dollar benefit from the handsets program, as the back-book sale was non- recurring.

After these normalisations, and excluding separation costs, the total would have been 396 million dollars, which reflects solid growth on 247 million dollars in FY24.

In FY26, we expect to make up, mostly through EBITDA growth and lower bank borrowing costs, for not having seven months of cash flow from Discontinued Operations and for having a full year of the new Vocus arrangements.

Again, that is excluding separation costs.

We expect FY26 cash capex to be broadly the same as FY25.

Into FY27 and FY28, earnings growth and lower capex should translate to higher cash conversion, and the lower borrowings base has de-risked our exposure to interest rates.

We don’t believe the ACMA’s latest proposals regarding spectrum licence renewal payments are a good idea.

But even if they remain, we would not expect to have to fund renewals until later in FY27 – which is very manageable.

Rating agencies understand the inherently lumpy nature of spectrum funding may cause short-term spikes in leverage.

But we have momentum with leverage reduction, dropping below the upper end of our S&P net debt to EBITDA target range of 2 to 3 times at the end of last year.

We expect to reduce leverage further in coming years.

We plan to de-risk our financial position again this year by refinancing the 1.67 billion dollars of bank debt we have maturing in July 2028.

Thank you.

I will now hand back to Iñaki.

Inaki Berroeta

Thanks John.

This slide sets out the drivers of shareholder value in our business and shows how we are tracking against the key metrics we have committed to grow.

Across these metrics, progress was strong in FY25, and we are confident of delivering further progress in FY26 and beyond,

Our stronger network and enhanced customer propositions are driving continued Mobile Service Revenue growth.

We expect that to translate to continued operating leverage and higher margins and return on capital as we execute cost discipline and capital efficiency.

The outlook for cash flow and dividends is positive.

My final slide covers our formal guidance for the Year.

We expect EBITDA to be between 1.665 and 1.735 billion dollars, which is growth of just under 4 per cent on a Pro

Forma basis at the mid-point of 1.7 billion dollars.

We are guiding for capex, on an additions basis, of 750 million dollars, with significant capex reductions to come in

FY27 and beyond.

Thank you.

We will now take questions.

Disclaimer

Paul Hutton

Thanks Iñaki. Just a reminder, if you wish to ask a question, please press “star one” to join the queue or “star two” to exit. Joining Iñaki and John for our questions today are members of the TPG leadership team. Our first question comes from Eric Choi, the Barrenjoey. Go ahead Eric.

Eric Choi

I had a few questions, do you want me to ask them all at once, Paul, or just one by one?

Paul Hutton

Yeah, run through them first, please.

Eric Choi

All of them, okay. First one's just on FY27 capital management thinking, and obviously there's been changes to spectrum and their Capex outlook since we last spoke. So, just wanted to confirm if maybe $600 million free cash flow or a touched under FY27 is still a fair estimate, and obviously you just did under 400 million this year, and you're going to see EBITDA growth and Capex reduction, so that feels fair. And so, if you did do 600 million, that would put you on an 8% free cash flow yield, and then I'm just wondering how much of that free cash flow yield do you return to shareholders, versus how much do you keep in case spectrum needs to be paid in lump sums? Are you sure you want two and three?

Paul Hutton

We'll go through that one first, that's excellent detail.

John Boniciolli

Yeah, actually, Eric, why don't I take that one? Firstly, your first question regarding calendar year '27, free cash flow to equity. I might just start with how we look at '26 free cash flow equity. And if you just take the numbers we've provided is... and that does get to broadly around 400 million. If you take the midpoint of EBITDA guidance at $1,700 million you take off cash Capex and same as '25, it's assumed for now working capital is neutral, and that's also assumed cash taxing in '26 is similar to '25. Lease costs, of course, will be slightly up because you've got the full 12 months of the TAWFA, and we've already commented on how borrowing costs come down. That gets you to around that $400 to 430 million mark.

If you then add to that, the reduction in our Capex, which we've already noted, we expect on additions basis to be

$650 million in '27, plus you add whatever you assume on mobile services revenue growth and revenue growth overall, you can absolutely get to that $600 million mark that I think you are provocating. So, that's the first question.

On the second one, we've been really consistent over the last year describing the strengthening of our balance sheet position, including the significant reduction in bank debt. And as a result of that, and the growth in cash flows that I've just stepped through, we've stated unequivocally, we expect to grow profits and cash flow, and with that we expect to grow the dividend. And that still holds 100%. And noting our strong balance sheet position, and as I noted when we went through the slides, we are absolutely comfortable in being able to absorb whatever spectrum outcomes will be finalised with the ACMA.

Eric Choi

Gotcha. Quick follow up. And nice jacket, by the way, John, in the preso. Someone told me to comment on that.

Number two, just on mobile subs, at an aggregate level that actually accelerated this half versus last half, and when last time you guys gave an update, you told us it would slow down. So I'm just wondering if you're seeing the same trends into early CY26, especially on that MVNO result? We just want to confirm there's no one-offs in that MVNO acceleration and it's literally all on better distribution and organic performance?

Iñaki Berroeta:

Thank you, Eric, I'll take that one. To your question on MVNO, there haven’t been any one-offs, so it’s organic growth.

And like you pointed out, it has to do with improvements on distribution, the weight of online I think is also playing well in this segment, and we see that brands that are moving more and more activity to online tend to perform better than the ones that are relying a bit more on physical channels. So, I think that that has helped the MVNO performance. I think that the performance overall on the second half was good, not just on MVNO, but also our digital first brands have continued to perform strong, and looking at the beginning of the year, we think that the trend continues.

Eric Choi

Thanks, Iñaki. Just a last one, just on your mobile ARPUs. If you look at your digital first ARPU, it was up 11%. So, my question is, do you have plans or drivers in the next two to three years to continue to lift that DFS ARPU faster

Disclaimer

TPG Telecom - FY25 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. than Postpaid? Because if you combine that with the fact that the lower cost to serve on DFS, do the economics of

DFS and Postpaid gradually become more similar?

Iñaki Berroeta:

Yeah, the idea is two-fold. If you look a little bit into felix, which is one of our digital-first brands that we have, last year we didn't really do any kind of movement in pricing. However, we did have a significant increase on the ARPU, and that is on the back of customers using the app to get incremental value plans, that is a model that works very well, that is a model like you say, is very low cost, and we think that that is the model that will continue to help improve the overall ARPU of the business. And on a year like '25, where we did the goal for customer growth, and we did get customer growth, we still obtain significant ARPU gains across the brands. So, I think that that's something that we'll continue to do.

And definitely when you look at the discount, the digital brands which have subscription brands, and some of our competitors will report that under Postpaid. So, it's getting a little more difficult to really do comparative analysis in the market. But this segment is a very interesting segment because it has huge growth. We still think that the performance of Postpaid, when you look at what we report Postpaid, which is the premium brand, Vodafone, comparatively, has done really well on customers and in ARPU. So, I think that this model of being able to address the different segments through different solutions is really working very well for us.

Eric Choi

Thanks Iñaki.

Paul Hutton

Thanks Eric. Our next question comes from Lucy Huang at UBS. You there, Lucy?

Lucy Huang

Thanks team. I've got three questions as well; I might ask them one by one. Just to follow on from Eric's question on prepaid, are you able to talk through churn trends in that part of the business? Because I've heard you've seen some good churn reduction off the MOCN deal, just wondering if you're seeing similar trends coming through on the prepaid side as well ?

Iñaki Berroeta:

Thank you, Lucy. Look, the trends on churn are consistent across the brands, also across prepaid and Postpaid, and across consumer and enterprise customers. On prepaid, we have the benefit of the MOCN and the improved network performance, not just coverage. But also, as we are moving more commercial activity onto digital channels, that also improves churn. Traditionally the physical channels have been higher on churn, so we see the prepaid churn also trending in a very favourable way.

Lucy Huang

Yeah, understood. And then, just with Postpaid mobile ARPU growth, it feels like there was probably a slight dilution in relation to the price increase you've put through. Any colour, whether there's been a little bit of trading down or whether there was a bit of drag from enterprise coming through mobile Postpaid ARPU?

John Boniciolli

So, it is true to say that the mix shift between business and consumer dilutes the overall, that is true. So, that practically means the consumer Postpaid ARPU improved higher than the average that you saw on our slide today.

So, it's a mix shift overall from between segments dilutes slightly. I hope that answers the question.

Lucy Huang

Yes. That makes sense. And I'll just confirm in terms of mobile Postpaid stuff, how much is now enterprise? It feels like that's grown a bit relative to consumer.

Iñaki Berroeta:

Hey Jonathan, maybe you want to take that one.

Jonathan Rutherford

Yeah, so I think, yeah, Lucy, it was a strong performance, I think two things I'd call out. One is clearly you saw the benefits of MOCN on churn, and I think we put that number up on 12.5%. So, it was really pleasing performance on churn, and I think net adds has been very strong, surprisingly strong across enterprise, government and small business, and I think we see the benefits continuing into 2026.

Disclaimer

Lucy Huang

Wonderful. And just my last question on the spectrum, ACMA has obviously put out their proposals in December, have you guys come up with an estimate of how much you are having to pay? I think we're thinking of $1.0 to $1.5 billion, is that roughly the right number over that three-to-five-year period?

John Boniciolli

Yeah, it is more than but significantly lower than what we've historically paid, but it's over a longer period of time.

Lucy Huang

And thank you so much. Thanks.

Paul Hutton

Thanks, Lucy. Our next question comes from Entcho Raykovski from Evans and Partners.

Entcho Raykovski

Thanks, Paul. Morning, everyone. My first question is just around the recent back book price increases in Postpaid, which Iñaki referenced. I wonder if you're able to quantify how much of a contribution you expect those back book price increases will add to Postpaid ARPU growth in FY26?

Iñaki Berroeta:

Thank for your question, but this is probably a bit premature to say that. Also I think that we've done on some cohorts of customers, so that does not include all our strategy for the year. So it is a bit premature to say anything in that respect.

Entcho Raykovski

Are you able to, I suppose, looking at the Guidance and maybe to look at this in a slightly different way, your EBITDA growth guidance, can you talk to some of the broad assumptions which underpin the mobile service revenue growth that you expect particularly on subs and ARPU?

John Boniciolli

Yeah, so no doubt the EBITDA growth has been for the last few years is supported by and relies on growth in mobile services revenue growth-point one. Point two, we maintain cost discipline as we've shown over the last couple of years again. And we are very pleased with our outcomes on cost discipline. And the combination of those two things largely drive the EBITDA to the growth and climb in the midpoint.

Entcho Raykovski

Okay, great. Sounds like you don't really want to go into specific assumptions around subs and ARPU, et cetera.

John Boniciolli

No, I mean we've always said that, and you've seen in the material of today, the customers have responded well to our multi-brand strategy and our expanded network. So that will continue and is our plan to continue. And of course, you've seen as shown the importance of ARPU growth and that still remains.

Entcho Raykovski

Got it. Okay, thanks, John. And then my next question, just looking at the post-paid consumer and enterprise churn, I mean you've been very clear that's down, but net ads and Postpaid were flattish over the year. I guess I'm just curious whether that reflects a smaller addressable market in Postpaid and what it means about the MNO's ability to put through price increases in that segment given the growth is coming at the prepaid end of the market. I guess, do you still think there's pricing power within the postpaid market? Thank you.

Iñaki Berroeta:

Thank you. So maybe I asked James to answer that one. In general, I think that we see a market in Postpaid that is being, again, classified as the premium brands. So when you look at Telstra, Optus and Vodafone, we have performed well, but it is a market that has declined in the last year.

James Gully

Yeah, thanks, Iñaki. I think the thing for us is that we've improved our net adds year-on-year very significantly on the back of MOCN. So year-on-year is a 96,000 improvement in our Postpaid performance. So we've seen a significant turnaround and we have improved our ARPU at the same time. The biggest switching pool within the market is still within the tier ones and the branded Postpaid businesses. So there's opportunity for us to continue to attack that

Disclaimer

TPG Telecom - FY25 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. market. But the primary market growth opportunity we see is in our digital subscription brands. So that's where we are focused on subscribed growth as Iñaki and John have talked about.

Jonathan Rutherford

Maybe if I just add for business, I think don't forget there's 14 million people employed in the economy across part- time and full-time roles. Most of those are what you would consider postpaid opportunities. Typically, how a company buys provides a mobile service, we think a really strong opportunity to grow share in the business segment.

Entcho Raykovski

Okay, great. Thank you. And just the very final one for me. You've referenced a highly aggressive NBN market. I'm curious what sort of impact you've seen on the fixed market from the Telstra introduction of the internet-only plans in

November. I don't know if it's too early to comment and what you expect the impact going to be. I mean, firstly on the market and then secondly, on your operations.

James Gully

Yeah Entcho, it's James here again. We haven't seen a material impact from the Telstra changes. We see that the big drivers in that competitive market is in the players that sometimes set outside traditional telco category in terms of energy in banking, converge players, but also the likes of Superloop and Aussie who are growing strongly in that space. So haven't an impact from Telstra directly at this point.

Entcho Raykovski

Okay, great. Thank you.

Paul Hutton

Thanks, Entcho. Our next question comes from Bob Chen at J.P. Morgan.

Bob Chen

Thanks, Paul. And hi, team. A couple of questions for me. And maybe just focusing on that really strong ARPU print in the digital first. Can you talk through the key levers you have to sustain that ARPU growth in that segment?

Iñaki Berroeta:

Thank you, Bob. Look, it is really the lever is to have a very simple pricing structure or plan structure. Also, a very simple way for customers to choose between these alternatives. And the outcome that we are getting is that even though a lot of customers come to these brands on lower price points, ultimately through the app and looking at the value that they're getting, they are on their own choosing higher tier plans. And that is really the key to that ARPU growth.

Bob Chen

Right, okay. So more mixed there. Okay, that makes sense. And then just given there's a fair bit of noise around what handset volumes might look like this year, given increase in prices or shortages of DRAM, how does that play into or potentially impact your mobile business?

Iñaki Berroeta:

Look, I think that that's an uncertainty in the market and we are monitoring closely. You seen how in '25 the overall handset market has gone down. And that probably has to do a bit on the difference performance of premium brands or brands that are attached to handset. But ultimately, when you look at our premium brand, we still do most of our connections are without handset. So it is an area that it may affect the market somehow, but we don't think that it's going to be a massive impact at this stage, even though we may see some shortages on some models during the year.

Bob Chen

Okay, great. Maybe just a final one on the broadband business. How should we think about the mix of that business going longer term? Is it more about defending NBN and really just growing that fixed wireless to grow gross margin and defend your share there?

Iñaki Berroeta:

The way we look at that business, I mean for us, that is a very good complementary business to our mobile business.

We have invested significantly on the capabilities to really leverage on that opportunity to cross-sell and up-sell inside our customer base. And also when we look at our different brands, brands where we've been better in terms of the

Disclaimer

TPG Telecom - FY25 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. cross-selling have performed better than the others. And I think these are capabilities that during this year we are introducing significantly.

Then on the profitability side, we continue to look at the profitability of this business. Fixed wireless is a big part of this and that's why we are now introducing further innovation with the 5G Standalone capabilities and that will enhance our overall footprint on fixed wireless. So our aim is to continue working on that. And then monitoring a bit how the trends on NBN play. But yeah, I think last year we still were negative even though we had a much better second half.

So things are getting better on the NBN side and as I said, with the new capabilities around convergence, we think that that will continue to improve in '26.

Bob Chen

Great. Thanks, Iñaki.

Paul Hutton

Thanks, Bob. Our next question's from Liam Robertson at Jarden.

Liam Robertson

Thanks, Paul. Morning, guys. Just first one on me, just around the MOCN revenue payback. I think you've absorbed close to $50 or $60 mil in the first year. I'm conscious in the accounts you're calling out more than offsetting revenue benefits in future years. Can you just tell us how you're thinking about the phasing of that net benefit trajectory moving forward?

John Boniciolli

We are already offsetting it would be point one. And that's important to note. We just acknowledged in the earlier that the growth ex-MOCN in half two was greater than half one. And that seemed to be because you incur the cost ahead of the revenue benefits come in. So that would be point one.

Point two, and I think we've discussed this on other calls and more broadly. I think depending upon ... and most analysts have said, "To break even, you've got to get about 100,000 to 200,000 net incremental subs to break even."

And to breakeven is definitely not our aspiration. It's definitely higher than that, and you've seen the subs growth in year one, which was very strong.

Liam Robertson

Yep, makes sense. And then just secondly on the FY26 EBITDA range. I'm conscious, I was trying to dig into some of the moving parts there. I mean, $70 mil range is probably wider than you've historically guided to. Can you maybe just talk to some of the more discretionary components? I mean, for example, I think your advertising and promo spend was up $40 mil in FY25. A lot of that relates to the launch of MOCN. So can you just talk to what's actually in your control? I mean ultimately it all is, but just conscious you're saying, "Too early to talk to some of the ARPU and subs trends." So what are some of the key swing factors from the bottom end to the top end of that range? Thanks.

John Boniciolli

Yeah, so firstly, the range is lower than prior period, so it is a smaller range. Secondly, we would expect, as I said, mobile services revenue growth through ARPU and subs to do most of the heavy lifting. We continue to grow FWA sub space, and that is highly profitable relative to, or more profitable than NBN. So that would be another factor.

Thirdly, you've seen our results that we grew handset revenue and slightly grew handset margin year-on-year. So not a big impact, but it's important that you drive handset volume profitably. And then three, and I think you've seen this now in our track record, but I'm really pleased with the performance that we're delivering on operating costs. And we've been really clear on how we see the outlook for that and that trend continuing. And I think it's really the combination of those things at EBITDA. But below EBITDA, we've already spoken about how bank borrowing costs reduce, et cetera, et cetera, that further supports NPAT.

Iñaki Berroeta:

I mean, the other thing is that traditionally we've been at the midpoint of all these guidance. And then of course, we look for some risks, but at the same time, we also have visibility of some opportunities. So that's why the guidance has that range.

Liam Robertson

Right. Thanks, guys.

Paul Hutton

Thanks, Liam. Our next question comes from Andrew Gillies at Macquarie.

Disclaimer

Andrew Gillies

Thanks, guys. Just digging into that OPEX performance, John, if I may, on the cost out of 100 million and the prior commentary you've made around broadly flat operating costs through 29, there's been a lot of news flow in the market on redundancies from AI. The commentary in the deck excludes that. Would that present further upside to this number? Are there any things you're looking at that may potentially present further upside to that operating cost flat or even out?

John Boniciolli

Yeah, we don't really think about AI like that. We see AI as complementary to our business. And a great example of that might be how we monitor our network at a greater scale that complements the humans, the people that every day run our network well. So that's how we think about it, and that's sort of our approach to it.

But more broadly on OPEX, why haven't we given that four-year outlook is one, because we are well through our IT modernization and business simplification, we see benefits being driven by that. We are now a simpler business post the sale to Vocus. We continue to deliver normal productivity, and I'm not referencing AI in that through our employee base.

And we do a really good job of how we approach third party spend with our partners. And what I mean by that is how we commercially work through rate, manage demand, and also scope with third party spend. And it's really the combination of all those factors that has delivered to date, that strong performance in OPEX, and we'll continue to deliver it in the outlook we're given.

Andrew Gillies

Perfect, thank you. And then just one quick follow up as well, on triple zero outage, just post that event in the market, lowest planned prices among MVNOs are increasing, appreciate you probably won't talk to wholesale agreements, but how's your competitive position in the MVNO space at the moment?

Iñaki Berroeta:

Yeah, maybe you take that, Jonathan.

Jonathan

Yeah, the competitive position on MVNO and the comparison to wholesale, probably the way we think of it is it accesses a portion of the market that we wouldn't reach directly through our own brands. Two things to consider.

One, some of the brands we work with were already in market with competitive carriers. They're now on the Vodafone network, which is great for us.

And then secondly, they typically access either different segments of the market or different distribution routes that wouldn't naturally be in our portfolio. So I think we view it as complementary and we view it as a clear growth opportunity.

Andrew Gillies

Thank you.

Paul Hutton

Thanks, Andrew. Our next question comes from Nick Harris at Morgan's.

Nick Harris

Thanks, guys. I think, like everyone, I'm just trying to unpack the mobile momentum. There's obviously a lot of opacity there, but it was a great result and obviously a stronger result in the second half than the first. So you've got lower churn coverage expansion, digital brands accelerating, and obviously some extra own goals from one of your competitors.

So can you just help us unpack roughly where the bulk of the subscriber growth is coming from? Specifically, are you seeing metro market share expansion for customers staying in metro, or are you seeing some really healthy expansion as a result of MOCN and those regional coverage gains? Which was obviously what you're talking about.

And I appreciate you've given us some of the costs to back solve some of it, but just from your perspective, that'd be helpful. Thank you.

Iñaki Berroeta:

Thank you, Nick. Look, I think the, so first to talk about the effect on MOCN in terms of the market growth by region, this has been something that we've been following really closely. And what I can tell you is that the growth has been across metro and regional. In metro, our best performers have been Melbourne, Perth, and Brisbane. And that is also

Disclaimer

TPG Telecom - FY25 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. related to the fact that in the past, we probably had a lower market share than what had in other metro areas. So those have performed really well.

And then when you look into more regional towns, and we've been following that also very closely, there's been growth across the board on every single one of them. There are some like Hobart or Sunshine Coast have been a bit outliers, but in general what we see is the growth volume base has been greater in metro in terms of percentage related to our existing customer base there has been much greater in regional. They have good performance across the board.

Nick Harris

Thank you, Iñaki. Sorry, just to make sure I heard that correctly. You said greater volume growth in regional strong growth in metros as well? Yeah.

Iñaki Berroeta:

Yeah. Well, in terms of customer numbers, there are 6 million people even in Melbourne. So if you get any incremental there, it is a lot of customers. But then percentagewise, those more regional centres where our market share was sometimes single-digit or low teens is where we've seen a percent bigger increase.

Nick Harris

Thank you very much.

Paul Hutton

Thanks, Nick. Our next question comes from Roger Samuel with Jefferies.

Roger Samuel

Well, hi, one and all, I've got a couple of questions, but firstly, can I just double check on my calculation for your net financing cost going into FY26? So if your bank interest is going down to $80 million, your lease expense or this cost is roughly the same, so $175 million and the handset receivable financing is about $95 million. So I'll get to a total of

$350 million. Is that roughly the right number?

John Boniciolli

Yeah, so our reported disclose was I think $393 million. And what we've said is bank interests goes through about

$160 million to $80 million. This is on a reported basis, Roger, and lease interests will go up as you've got the full 12 months and we've said handset financing costs will come down simply because the size of the forward book will be lower than the back book sold in 25. So that gets you some of that math and I appreciate it's busy below the EBITA line gets you to about an $80 million reduction on a reported basis, but on a pro forma basis it's obviously higher than that. It's about a hundred million.

Roger Samuel

Yep. Okay.

John Boniciolli

Is that helpful?

Roger Samuel

Yep. Yep, that's helpful. Thank you. And secondly, just on fixed broadband, looks like the decline in NBN subscribers has moderated in the second half, but you also sold some of... But you also saw the EGW business to Vocus as well.

How much of that customer actually moved across to Vocus as part of that transaction?

John Boniciolli

Well, we saw a lot of customers moved, but in the half there was another 9,000 that moved. But obviously the transaction completed with a whole bunch of customers moving in much larger than the 9,000. So when you look at the half one versus half two, in half two, there was a transfer of about 9,000. So you're right, we materially reduced and improved our performance in half two on NBN than half one.

Roger Samuel

Yep. Okay. And just lastly on your KPIs, you've made some good progress in there. Just wondering, but with the number of IT applications down to 485 versus 470, what's the reason behind that? And just wondering, maybe with AI you could accelerate the reduction in the number of IT applications going forward?

Giovanni Chiarelli

Disclaimer

Yeah, thanks Roger, Giovanni. So you can appreciate the fact that also our IT transformation had to pivot. So the plan that was initially designed was not considering the Vocus transaction and suddenly we had in 2025 to pivot it and definitely go for a huge separation. So in some way now the number of systems is also counting some duplications because we had to clone few systems in order to separate the business. This will be normalised across

2026. So I would say it's a small deviation from the plan, but in the long term the plan is absolutely the same. So I would not be worried about that.

Roger Samuel

Got it. Thank you.

Paul Hutton

Thanks, Roger. Our final question at the moment comes from Nick Basile from CLSA. Just a reminder, if you do have a question to press star one. Go ahead please, Nick.

Nick Basile

Thanks, Paul. Morning team. Yeah, I've just got a couple questions. The first one on the mobile business, I think Iñaki talked about the strong overall subscriber net adds and you talked about, I guess the improving post-paid churn. Just interested I guess in the context of the increase in marketing spend, how we think about the phasing of benefits or any updated sorts on the phasing of benefits from network sharing and the outlook for churn over the next few years.

And I'll ask my second question I guess later.

Iñaki Berroeta:

Thank you, Nick. Well, first in terms of our marketing spend this year is being good in the sense of being able to have a good return on that expenditure. It was also an incremental expenditure that we did virtually maintaining a flat opex.

So I think that that's also part of our discipline. In terms of the churn improvements, we don't really associate churn improvements to marketing spend. That has a lot more to do with the quality of the service and more specifically with the quality of the network. So for that reason, we are optimistic around our churn trends, and we are also optimistic around the quality of our marketing spend as well.

Nick Basile

Okay. Yeah, that's fair. And the second question, somewhat of a follow-up to Andrew's on AI, just kind of interested to take that from a different angle. Can you talk to any ways you might be benefiting now or able to benefit on the revenue side or customer experience onboarding, et cetera. And specifically, I guess given you've kind of called it out the digital strategy. Yeah, just trying to think about how AI might be of benefit going forward versus what you've done to date. Thanks.

Iñaki Berroeta:

Thank you, Nick. Look, I think we'll probably discuss more around AI on a different occasion when we do an investor day, but I think that to be little bit where we are, we look at AI in three phases. One of them is around building capabilities. A lot of the systems simplification and upgrades also the investment we've done on structuring our data model are basic pillars for AI. So that's something that has been a big part of our transformation programme as well as building capabilities on the people in the company around AI. The things that we are working, like we said before, are two-fold. One of them is around network, automation operations, but also the way to... we are able to monitor in a much more individual way the performance of our network per customer is something that we are investing and working on. And this is something that we think AI will bring greater benefits.

And the other part where we are also working is around improving our customer experience. And that goes things that have to do with just a better way to handle the calls, better way to serve the customers, better way to assist our call centre agents on the way that we do that through reduce the times that customer had to call us to be able to be better in detecting challenges on our service and being able to provide a better service. And that's also something that is work in progress. We are investing on that and we are also quite optimistic around where that goes. And probably the part that you were mentioning, which is more around the revenues, I do think that the industry will play a significant role in enabling AI to our customers. That's probably more of a third phase of our AI strategy.

Nick Basile

Okay, great. Yeah, thanks very much.

Paul Hutton

Thanks, Nick. We have a follow-up call from Entcho at Evans and Partners.

Entcho Raykovski

Disclaimer

Thanks Paul, and thanks for taking my follow-up. So this will hopefully be a quick one, but it's on ROIC and how it can be driven over time by growing pricing or ARPU. I mean, I'm conscious that the profile on the ROIC was 5.4% in

FY25. Correct me if I'm wrong, but you should see an incremental 70 basis point increase into 26 from the handset refi restructure, which gets you to just over 6%. I suppose then the question is where do you see ROIC going longer term? I think John referenced some growth over time and then within that growth, how important is ARPU growth in mobile for that ROIC improvement? Do you expect that will be the key plank or do you see other elements like subs growth and perhaps cost reductions as being more important?

John Boniciolli

Yeah, so firstly, the way you've described the impact of ROIC year-on-year from the handset receipt or sale program is correct. Simply cares you get the full annualised benefit in 26 in the denominator of ROIC, which I think is what you were referring to. So I agree with that point. Look, I always, there's a thin line between the numerator and the denominator of ROIC. The numerator is reliant on growth in service revenue driven by both ARPU and subscribers, and I think we've been demonstrating that well over the last few years in our track record there.

It also relies on the continued discipline and against on our operating costs, which our track record I think is very strong. It also relies on continuing to manage fixed profitability overall across all our fixed products. And then on the denominator of ROIC continue that capital efficiency Capex is coming down. We've made clear reference to that today in our outlook. So it's really those factors that drive our outlook, ROIC, and why we are confident will continue to grow.

Entcho Raykovski

And you don't have a longer-term target you can share with us?

John Boniciolli

Look, I mean, we want to continue to grow ROIC above WACC. That's definitely our base case as we think about it. I mean, that's just good economic practise and you can see the trend on that is very strong. And then of course we want to grow above that.

Entcho Raykovski

Okay. Got it. Thanks, John.

Paul Hutton

Thanks, Encho. And we have another follow up question from Liam at Jarden. Go ahead, Liam.

Liam Robertson

Thanks Paul. Sorry guys, just really quickly on mobile ARPU, I'm just conscious at the first half you made a comment around pricing being aligned across front book and back book following the pricing refreshes. So we would've seen that flow through in the second half. Just conscious then, John, to your comments on ARPU growth, am I right in thinking that that will have to be predicated on front book price increases moving forward? Thanks.

John Boniciolli

Yeah, I'm not going to make any comment on future price plan refreshes. We just won't do that.

Liam Robertson

If you can confirm that pricing across the front book and back book are now more broadly aligned.

John Boniciolli

Well, over the last couple of years given our actions, that is true. Absolutely true.

Liam Roberston

Thanks.

Paul Hutton

Thanks, Liam. We have no more calls at the moment, so that will conclude the call for today. Thank you very much for joining.

Speak to you soon.

End of transcript