TPG Telecom Limited (ASX:TPG) Receives ‘BBB’ Rating from S&P Global
Rating Action Overview
S&P Global Ratings has assigned TPG Telecom Limited (ASX:TPG) a ‘BBB’ long-term issuer credit rating with a negative outlook. The rating reflects the company’s recent capital management initiatives and the sale of assets to Vocus Group Ltd., which provided net proceeds of approximately A$4.7 billion.
Rating Rationale
TPG’s solid market share and stable earnings support its credit quality. The company holds the third-largest share of the mobile market and the second-largest share of wholesale fixed-line services in Australia. However, competitive pressures from larger players like Telstra Group Ltd. and uncertainties regarding capital reinvestment and debt reduction plans contributed to the negative outlook.
Capital Management Initiatives
Following the sale to Vocus, TPG plans to repay debt and maintain a steady debt-to-EBITDA ratio of around 2.5x. The company expects to use the proceeds to reduce bank debt by approximately A$2.4 billion and return about A$3 billion to shareholders through a capital reduction. TPG aims to achieve an EBITDA margin of 30%-33% over the next two years through a leaner cost structure and capital-light business model.
Motley Fool contributor Kiarra Jackson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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