Telcos Vodafone and TPG have been given permission to merge to create a new $15 billion mobile and broadband powerhouse after the Federal Court yesterday threw out a ruling by the ACCC that the tie-up would harm consumers.
TPG Telecom is in the line of fire as it awaits the decision from the ACCC on its merger with Vodafone Australia. Brokers suspect downside risk to the share price is considerable if the merger is disallowed.
UBS notes TPG Telecom will not be allocated 3.5GHz spectrum in Singapore. However TPG Telecom and others will be allowed access to the spectrum in order to offer 5G services through a wholesale arrangement.
The Federal Court has ruled that the proposed merger with Vodafone Australia can go ahead. The merger is expected to be completed in mid 2020. UBS considers the development broadly neutral for the sector.
FY19 results were in line with UBS estimates. The broker suggests the NBN aspirations could begin to affect forward earnings. The company expects FY20 to be the peak in headwinds from the NBN with the drag on earnings lifting to -$110m.
At first glance FY19 operating earnings (EBITDA) beat estimates with more cost reductions and better income in the enterprise division. First-time FY20 operating earnings guidance is $735-750m, also ahead of Morgan Stanley's forecasts.
First half results were in line with expectations. Excluding mobile network impairments, underlying operating earnings (EBITDA) were up 3%. Morgans believes this was a strong result in the face of NBN margin pressure.