TPG vows to continue NBN rival network

TPG wants to capture city customers from NBN Co. Photo: Rob Homer TPG wants to capture city customers from NBN Co. Photo: Rob Homer
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TPG wants to capture city customers from NBN Co. Photo: Rob Homer

TPG wants to capture city customers from NBN Co. Photo: Rob Homer

TPG Telecom executive chair David Teoh will refocus on the construction of its controversial broadband network, which will connect more apartments to high-speed internet while depriving NBN Co of the revenue it says it needs to stay profitable.

TPG will also take on Telstra and M2 Group by launching new enterprise and business products aimed at capturing a bigger slice of the of the $4.5 billion corporate and wholesale data market.

The Australian Competition and Consumer Commission ruled in September that TPG’s plan to hook 500,000 apartments to fibre-to-the-building broadband was entirely legal despite NBN Co’s attempts to have it banned.

The company building the $41 billion national broadband network says TPG’s plan and others like it will cherry-pick lucrative city-dwellers and leave it to supply unprofitable broadband to the bush.

If NBN Co does not make a profit, then accounting rules will force its billions of dollars in expenses onto the federal budget.

Mr Teoh said TPG Telecom started connecting users of the service in mid-September and that the company and its customers were “very excited” by the high speeds and low costs.

“There was a lot of uncertainty in the last few months and now the ACCC has confirmed the whole thing, it’s quite good,” he said. “So the project is still progressing and we are focusing on the FTTB rollout.

“It’s a very exciting product that will bring benefits to the customers and marketplace.”

Communications Minister Malcolm Turnbull said he would push for any company offering the service in competition with NBN Co to functionally separate – a move seen by some analysts and commentators as a blocking move.

But Mr Teoh said none of the details revealed thus far would stop TPG’s progress.

“We don’t really know what the rules are yet and that’s why we don’t want to comment [until we do],” he told Fairfax Media.

The push came as TPG on Tuesday reported a solid 15 per cent increase in net profits to hit $172 million during financial year 2014. Revenues over the same period rose by 34 per cent to $970 million.

The company predicted earnings before interest, tax, depreciation and amortisation would grow to between $455 million and $460 million, above consensus expectations.

Mr Teoh said a core part of TPG’s strategy was to use its infrastructure holdings to dump less-profitable services. This could mean swapping customers from resold Telstra services to TPG-owned fibre services.

TPG consumer business general manager Craig Levy said the company would offer high-speed internet services with much larger download capacities to more corporate customers from early 2015.

TPG’s corporate business is on the rise and contributed $20 million in underlying EBITDA to the overall business along with a 3 per cent increase in profit margins.

It also launched NBN products and is currently signing on between 500 and 600 customers a week. But it also said it was too early to provide the total number of NBN users and their profitability.

Washington H. Soul Pattinson owns 27 per cent of TPG. Its chairman Robert Millner said he was very happy with the investment.

“Soul Pattinson have got enough [shares], but I might buy some more myself,” he said. “We’re not doing anything we shouldn’t be doing [on FTTB], so I’ve every confidence in David Teoh and the management team to do the right thing and grow the company.”

CIMB research analyst Ian Martin said he did not expect TPG could hit its target of reaching 500,000 apartments.

“They’re very keen to do it, but there are some practical constraints,” he said. “The response from NBN Co hasn’t been meaningful yet, but once they work something out with Telstra it will quickly swamp TPG.”

But Mr Martin added that functional separation was not a hurdle for TPG because its FTTB program was profitable enough to absorb the cost.

TPG shares on Tuesday leapt 40¢ to $7 compared with the rest of the S&P/ASX 200, which rose by just 0.1 per cent.

This story Administrator ready to work first appeared on Nanjing Night Net.