Bullish View on TPG, page-81

TPG had very predictable costs with Telstra Copper as did all the carriers.
A low cost model led to good margins and growing subscriber numbers.
Things are now way more complicated.
First of all TPG's unlimited plans on NBN are financially unsustainable.
Data backhaul costs were limited when on ADSL as the speeds helped cap TPG's backhaul costs.
With downloads doubling every 18 months TPG are going to cop considerable backhaul costs with NBN.
As the NBN rolls on, these costs will rise eating into their margins.
Some back of the envelope numbers makes me question whether TPG profitability will be zero in 3 years.. unless NBNCo drops their backhaul costs or TPG raise prices.
Current NBN prices are unsustainable
With around 25% of TPG's customers converted to the NBN. Every customer they convert, after conversion costs will cost them another $15per month average. As NBN is more expensive than Telstra Wholesale. The cost of the backhaul is likely to increase yearly by around $8 per month as data volumes increase.
Or TPG won't buy the backhaul, stay profitable and supply a slow service...
Not enough backhaul purchased from the NBN is already happening, and the ACMA and ACCC are already investigating all carriers.

I am concerned that TPG's foray into the mobile market is a mistake.
2 x carriers in Singapore just started offering unlimited calls, texts and Data.
How long will it take to recoup the money invested in the network?
The Singapore market is already very competitive and it looks like the incumbents have made entry more difficult.

Australia could be a money pit, for mobile.
TPG paid twice as much as Telstra and Optus for their spectrum.
TPG's Spectrum holdings are tiny. With only 10MHz of spectrum at 700MHz and no spectrum at 850, 900 and 2100. The other three carriers are going to pants them for speed and tower capacity.
With 10MHz I believe the towers will be limited to 100Mbps of bandwidth for the whole tower.

Telstra and Optus already have the best tower sites. There is only so much room on a tower.
While TPG maybe able to share some of those towers. If they do, it will be down the bottom of the tower as the tops are reserved by the incumbents.
With Data consumption rising rapidly and their tiny spectrum holdings it will mean if they offer unlimited data their network will be clogged very quickly.
The 3.6GHz 5g auction is going ahead late 2018 early 2019
So they will need to have their cheque book ready for that one..
their cheque book could be rather empty given the capital costs that will be required to build their mobile networks..

Operations.
TPG have bought all of these companies but the computer and billing systems of the original companies remain.
The cost of interfacing them all with NBNco is huge.
One day they need to cough up big to merge the IT Systems and operations, Or face ongoing higher costs.
Vocus took the plunge...and look what happened to them.
TPG at some point will be forced to simplify its IT backend. It's going to be expensive.
It probably needs to start doing this now and have it completed within the next 3 years..

This company has run on the smell of an oily rag.. that's their business model and that's how they have made great profits. I am sure they will remain a strong competitor in the Australian Market, but they have some real challenges ahead.
Like every other carrier in Australia I think they face some tougher times....

There is also the conspiracy theory that Telstra is shedding staff so that it can infiltrate the other carriers with bad corporate culture, adding layers of beauracracy, screwing up people's bills, and making Telstra look good... it seems to be working..