Are TPG Telecom (ASX:TPG) shares gearing up for a demerger?

TPG shares could be in focus with the potential demerger of its infrastructure.

| More on:
A man in a business suit whose face isn't shown hands over two australian hundred dollar notes from a pile of notes in his other hand to an outstretched hand of another person.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • TPG might be planning a demerger of its infrastructure business
  • This could involve just its towers business, or everything including the fibre network
  • Telstra and Optus have both been successful at monetising their tower assets

The TPG Telecom Ltd (ASX: TPG) share price is in focus today on news of a potential demerger of its business.

There are several different parts of TPG's business. It operates many different telecommunication brands including Vodafone, TPG and Lebara.

It also owns and operates nationwide mobile and fixed networks that are used to connect Australians.

Potential TPG demerger?

It's the infrastructure side of the business that could be separated.

According to reporting by The Australian, TPG has chosen Bank of America to help it with the sale of its telco tower portfolio worth $1 billion.

But the newspaper also reported on speculation that a demerger could mean all of its infrastructure assets being divested which could also include the fibre network. Only the operating company might remain. If this option were to be pursued then it could mean those TPG assets being sold/divested for "billions of dollars".

Potential investors might be interested in TPG's assets because its fibre network is new and advanced after a period of recent construction.

If some sort of deal were to happen, The Australian suggested that TPG would still keep holding a stake in the demerged entity.

Is there any precedent for this sort of deal?

There has been a lot of merger and acquisition activity over the last year. Telco rival Telstra Corporation Ltd (ASX: TLS) has already done somewhat of a similar move.

At the end of June 2021, Telstra announced it was selling 49% of its towers business for $2.8 billion. The sale was to a consortium consisting of the Future Fund, Commonwealth Superannuation Corporation and Sunsuper.

Telstra's towers business is the largest mobile tower infrastructure provider in Australia with approximately 8,200 towers. That transaction valued the Telstra InfraCo Towers business at $5.9 billion.

It was also reported that AustralianSuper agreed last year to pay Singtel's Optus $1.9 billion to own 70% of the telecom towers business.

TPG share price snapshot

Over the last month the TPG share price has fallen over 8%. In the last 12 months it has declined by 17.6%.

Motley Fool contributor Tristan Harrison 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 owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Communication Shares

A couple stares at the tv in shock, with the man holding the remote up ready to press a button.
Dividend Investing

Why Macquarie expects this high-yielding ASX All Ords stock to charge higher AND boost its dividends

Looking for a quality ASX dividend share with strong growth potential? Read on!

Read more »

A woman sits in her home with chin resting on her hand and looking at her laptop computer with some reflection with an assortment of books and documents on her table.
Communication Shares

Is there more upside for CAR group or REA group shares?

Let's see what this broker has to say about these ASX 200 stocks

Read more »

A woman standing in a blue shirt smiles as she uses her mobile phone.
Communication Shares

3 reasons why the Telstra share price could be a top buy

I’m still calling this leading ASX share a buy.

Read more »

A businessman presents a company annual report in front of a group seated at a table
Communication Shares

Superloop and Aussie Broadband shares: insights from Macquarie's roadshow

Here’s what the broker expects from these two telecommunications companies. 

Read more »

Young woman thinking with laptop open.
Communication Shares

6% potential yield? Here's the Telstra share price and dividend forecast

Can the telco deliver strong returns?

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Communication Shares

3 reasons to buy this quality dividend-paying ASX 200 stock today

A leading fund manager expects more near-term outperformance from this ASX 200 dividend stock.

Read more »

Delighted adult man, working on a company slogan, on his laptop.
Communication Shares

Macquarie initiates coverage of Superloop shares with outperform rating

The broker reckons Superloop has what it takes to soar.

Read more »

woman on phone
Communication Shares

Here's the earnings forecast out to 2029 for Telstra shares

Are further Telstra share price gains possible? Let’s consider the earnings outlook.

Read more »