At the time of 2016 AGM exactly 12 months ago, TPG hadn't even...

At the time of 2016 AGM exactly 12 months ago, TPG hadn't even won any spectrum in Singapore and Australia.

Fast forward 12 months, the 2 major projects are well underway in both countries.

In Singapore, we are just 12 months away from achieving nationwide outdoor coverage.

In Australia, we are just 6 months away from having some initial site clusters implemented in Sydney, Melbourne, Canberra, Adelaide and Brisbane.

The key risks that I have been concerned about are budget and timeline. This morning's announcement addresses my concerns for now. Both projects are still on time and the projected capital expenditure is still within the initial assumptions.

As usual, management continues to come up with plans to mitigate the margin erosion caused by the NBN migration. This morning's announcement of a partnership with Adelaide City Council is just one example.

I'm becoming more and more confident that TPG's mobile project will one day become successful.

TPG currently already has almost 2 million broadband subscribers. With the size of Australian household being approximately 2.2, just from their own broadband customers, they have approx. 2 million x 2.2 = 4.4 million potential mobile customers. This combined with their existing 500,000 mobile customers means that right from the very beginning, TPG already has between 4 to 5 million potential customers who are already quite favourable towards TPG, whom they can immediately target.

I will assume that within 3 years, TPG is able to convert half of these potential customers to become mobile subscribers and that their ARPU will be half of the current average and their EBITDA margin will only be 20%.

In FY2021:

No. mobile subscribers = 2,500,000
ARPU / month = $25 (half of current average of approx. $50)
EBITDA margin = 20%

Revenue = 2,500,000 x 12 x $25 = $750m
EBITDA = 20% x $750m = $150m

Although this level of profitability in Year 3 is still not enough to justify the almost $2 billion (so far) that they are investing into mobile, if they can achieve this, then they should be on the right track to achieve their strategic goal of diversifying their revenue away from fixed broadband and towards the bigger pool of mobile.

The above simplistic calculation doesn't include other areas of synergies such as Corporate mobile customers, Internet of Things (IOT), Fixed Wireless, etc.

The next thing that I'm worried about is Roaming Agreement. For TPG to be able to offer nationwide coverage right from the very beginning, they MUST secure a commercial roaming agreement with one of the three existing MNOs. I can't see how Telstra and Optus would be willing to help TPG, therefore the only option left is Vodafone. I expect an announcement on this matter sometime in calendar year 2018.

Those who followed Teoh & Millner's lead in the latest capital raising, their investment would have been up by approximately 20%. Not bad for 6 month return.