The TPG Telecom Ltd (ASX: TPM) share price has lifted around 8 per cent to $7.30 this morning after the group confirmed its FY17 year-to-date performance was "tracking well" against guidance for total underlying EBITDA between $820 million to $830 million.
Corporate growth
The group also confirmed its corporate dark fibre utilisation business continues to perform strongly with the famously frugal operator flagging more staff hires amongst its corporate sales team just one week after major rival Vocus Communications Limited (ASX: VOC) admitted that it did not have enough staff to keep up with ballooning demand in the enterprise dark fibre space.
In fact much of the investment case for both businesses is around their ability to tap into the still booming demand for capacity on their wholly owned fibre networks that provide internet and cloud services to businesses. Thanks to the exponentially growing demand for data, I would not bet against this continuing to be a major growth spot for both Vocus and TPG over the next 5-10 years minimum.
Consumer headwinds
It's no secret that the arrival of the NBN means margins are under big pressure in the consumer broadband space, but that issue may improve if the NBN Co. revisits its pricing model with its management team itself repeatedly acknowledging it as an issue on the agenda for reform in 2017.
TPG is also investing heavily in building and marketing its own fibre-to-the-premises networks for consumers that will offer the super-high margins and competitive advantages that are likely to mean a return to decent profit growth in the years ahead in my opinion.
Singapore
It is also competing in a two-way auction against new Australian broadband market entrant MyRepublic in Singapore for the right to provide mobile carrier services in the island state.
I expect victory in the auction will be a pre-cursor to a push into the Singapore discount broadband market in a typically Machiavellian move to attack a competitor by TPG's founder and chief executive David Teoh. MyRepublic is looking to steal market share from TPG in Australia, although remains loss making and is likely to run into trouble if it finds the competition hotting up across the steamy island state.
To me TPG shares look excellent value even after today's price rise as I expect it will hit the top end of guidance to trade on around 15x estimated forward earnings when selling for $7.30 per share.
