TPG Report $228M Writedown Amid Merger Wait
TPG Telecom has today informed investors it will report $228 million in first-half writedowns, following its decision to cease building its local mobile network.
The news comes as TPG awaits the ACCC’s approval of its $15 billion merger with Vodafone Hutchinson Australia (VHA), despite “preliminary competition concerns” expressed last year.
Disclosed to the ASX today, the telco has advised it will writedown the value of its spectrum licenses by ~$92 million, its mobile network capital expenditure by $76 million, plus writing off $60 million in interest charges.
Some commentators claim today’s market update seeks to encourage the ACCC’s approval of the proposed merger.
Earlier this year, TPG announced it had ceased rollout of its local mobile network, citing the Australian government’s ban of Huawei 5G equipment as a key contributor.
The telco claims a ban on its principal equipment vendor – Chinese giant Huawei – means there’s little “commercial sense” to invest in a network which cannot upgrade to 5G.
“Having ceased its mobile network rollout, the Group now has no business plan or strategy for using its spectrum licenses on a standalone basis and accordingly, the carrying value of these licences is required to be reassessed,” claims the telco in an ASX release.
“It is expected, that in the event that the merger with VHA proceeds, the spectrum will be complementary to the VHA mobile network.”
“Therefore, pursuant to an impairment review undertaken for its 1H19 accounts, the Group will reduce the value of its spectrum licenses by ~$92 million, primarily reflecting the fact that, as the licenses have finite lives, their value necessarily diminishes over time.”
TPG Telecom is scheduled to announced its 1H19 results on March 19, and claims notwithstanding these impairments, the Group “continues to operate comfortably within its banking covenants.”
Shares in TPG Telecom slipped 0.905% to $6.57 shortly after market open.