Highlights

  • Macquarie Research maintains an Outperform rating with a target price of A$4.10
  • FY25 EBITDA increased 18.4% to A$1.66 billion, driven by mobile subscriber growth
  • FY26 EBITDA guidance set at A$1.665–1.735 billion, signalling continued Earnings stability

TPG Telecom Limited (ASX:TPG) has entered a transitional phase following a significant portfolio reshaping and Capital management program, alongside improving operational momentum in its core mobile Business. FY25 results reflect a business that is increasingly streamlined toward mobile services, with cost discipline and subscriber growth offsetting continued pressure in legacy fixed-line segments.

Despite these improvements, the share price remains closely tied to execution of its mobile-led strategy and the ability to sustain earnings growth in a highly competitive Australian telecommunications market.

With Macquarie Research maintaining an Outperform rating and a target price of A$4.10, investor focus is shifting toward the durability of mobile Revenue growth and the sustainability of Cash Flow improvements.

Broker View Anchored in Mobile Growth Transition

Macquarie’s Outperform rating on TPG Telecom reflects confidence in the company’s repositioning as a leaner, mobile-focused telco.

The broker view is primarily supported by three factors: improving mobile subscriber momentum, structural simplification following asset divestments, and stronger free cash flow generation.

FY25 Results Show Earnings Rebound Supported by Mobile Expansion

TPG Telecom reported a notable improvement in FY25 financial performance, with EBITDA rising 18.4% to A$1.66 billion.

This growth was primarily driven by mobile service revenue expansion and disciplined operating cost management. Mobile service revenue increased 4.2%, supported by the addition of 228,000 new subscribers, marking the strongest growth period since 2022.

Average revenue per user also increased modestly, reflecting a combination of pricing stability and customer mix improvements.

Net profit after tax improved significantly to A$52 million compared to a loss in the prior year, although earnings remain influenced by accounting adjustments and restructuring impacts.

The results indicate a business in transition rather than a fully stabilised earnings profile, with mobile growth offsetting structural weakness in other parts of the portfolio.

Mobile Business Emerges as Core Earnings Engine

The mobile segment has become the primary growth driver for TPG Telecom.

Subscriber additions were supported by regional network expansion initiatives and improved Brand positioning across digital-first offerings. Management attributed growth to increased network coverage and targeted promotional activity.

This expansion has been particularly important in reversing earlier stagnation in subscriber growth trends.

However, the Australian mobile market remains highly competitive, with pricing pressure and high churn rates continuing to influence long-term Margin dynamics.

As a result, while subscriber growth has improved, the sustainability of revenue per user remains a key variable for future earnings trajectories.

Fixed-Line and Legacy Segments Continue to Lag

Fixed service revenue growth remained modest at 0.7%, highlighting ongoing challenges in the NBN and broadband market.

Structural pressures include wholesale pricing dynamics, aggressive competition from low-cost providers, and a general shift in consumer behaviour toward mobile and bundled services.

While fixed wireless and selected network Assets provided partial offset, the segment remains a drag on overall group growth relative to mobile operations.

The divestment of certain fibre infrastructure and enterprise assets has simplified the business, but also increased reliance on mobile performance for earnings expansion.

Capital Management and Balance Sheet Strengthening

TPG undertook a significant capital management program during FY25, including a $3 billion capital return and Debt reduction initiatives.

The company also implemented a handset receivables financing program, which contributed materially to Operating Cash Flow improvements.

Operating free cash flow nearly doubled to A$1.29 billion, although this was partially influenced by financing structure changes rather than purely operational improvement.

Lower Capital Expenditure is expected to support continued free cash flow generation, as the company moves beyond peak Investment phases in network and IT systems.

From a financial structure perspective, these initiatives have strengthened Liquidity and reduced Leverage, supporting more predictable Shareholder distributions.

Dividend Policy Signals Gradual Rebuild in Payout Capacity

TPG maintained total FY25 dividends at 18 cents per share, with an additional final dividend of 9 cents declared for FY25.

The company has indicated a policy shift toward stable and gradually increasing dividends, subject to earnings and cash flow growth.

This approach reflects a cautious stance, balancing capital return expectations with ongoing investment requirements in mobile infrastructure.

While dividend stability may appeal to income-focused investors, future increases remain contingent on sustained earnings growth in the mobile segment.

FY26 Guidance Reflects Continued Incremental Growth

TPG Telecom has guided FY26 EBITDA to a range of A$1.665 billion to A$1.735 billion, representing modest growth from FY25 levels.

Management expectations are underpinned by continued mobile subscriber growth and cost discipline.

Capital expenditure is expected to remain around A$750 million, suggesting a relatively stable investment profile compared to prior years.

The guidance implies that earnings expansion is likely to be gradual rather than accelerated, with limited near-term catalysts beyond mobile execution and operational efficiency improvements.

Strategic Positioning as a Mobile-Led Telco

TPG’s strategic transformation has repositioned the company as a more focused mobile operator, following divestments of non-core infrastructure and enterprise assets.

The regional mobile network sharing agreement has expanded coverage and supported subscriber growth, forming a key pillar of its competitive positioning.

This structural shift aligns TPG more closely with global telecom peers that prioritise mobile revenue and scalable network Economics.

However, the success of this strategy depends heavily on continued subscriber Acquisition, churn management, and pricing stability in a competitive market.

Competitive and Structural Considerations

The Australian telecommunications sector remains highly competitive, with three major mobile network operators and multiple MVNO participants.

Pricing pressure, promotional intensity, and high customer switching rates continue to shape industry dynamics.

At the same time, network investment requirements and spectrum costs create structural constraints on margin expansion.

TPG’s ability to differentiate through network expansion and digital-first brands will be central to its medium-term earnings trajectory.

Conclusion

TPG Telecom’s FY25 results reflect a clear turnaround in earnings momentum, driven primarily by mobile subscriber growth, cost discipline, and capital management initiatives. The company has repositioned itself as a leaner, mobile-focused telco with improved cash flow generation and a simplified operating structure. Macquarie’s Outperform rating highlights confidence in this transition, although the path to sustained earnings growth remains incremental rather than rapid. With FY26 guidance pointing to modest expansion and continued competitive pressure in the Australian telecom market, TPG’s investment narrative is increasingly dependent on execution within its mobile segment and its ability to maintain revenue stability in a structurally competitive environment.