with near 0% margins on NBN customers of course things look bad for now, make no mistake ALL re-sellers are having the same issue
Great post in general but these zero margins have obviously raised a red flag with me. When we look at Telstra's main challenger in the Fixed Broadband space we see a clear difference in performance. TPG had 861K subscribers at FY18 which is close to half of all fixed connections however gross profit for the segment only fell from 51% to just 48%. This suggests to me that the TPG fixed broadband segment is far healthier than the same segment that Penn has created, if this is the case then one is left with the impression that Telstra is running zero margins just to hold its fixed market share against TPG even while TPG maintains healthy margins on the business.
I wasn't able to find any direct reference to the margins TPG is achieving on the NBN customers but a 50% margin on the whole segment suggests that it is certainly not zero. I hold Telstra more for the 5G growth story than the NBN horror story and since NBN revenues and EBITDA have become such a small proportion for Telstra overall I am quite comfortable with that however I cannot escape the conclusion that Penn is setting TLS up to fail in the NBN space and that this segment is going to be a ball and chain on the 5G growth story.
Interested in your views on this.
TLS Price at posting:
$3.18 Sentiment: Hold Disclosure: Held
(20min delay)