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NII Holdings Inc.Annual
Report
2020
Contents
Chairman and CEO’s letter
Strategy and Performance
Key Risks
Operating and Financial Review
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
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6
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60
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66
67
122
123
132
1
Highlights
REVENUE
$4.35b
24 per cent from 2019
NPAT
$734m
EBITDA
$1.39b
18 per cent from 2019
NET CASH FLOW
$342m
First six months post-merger
Annual Report 20202
Chairman and CEO’s letter
Dear Shareholders,
2020 highlights
2020 was a year in which Australian
society and the economy was
subjected to significant unexpected
shocks but also showed remarkable
resilience.
Telecommunications services played
an essential part in the everyday lives
of Australians, with the COVID-19
pandemic and the bushfire crisis
highlighting the critical role that
the sector plays in our society.
While supporting our customers
and employees through these
difficult times, we completed
Australia’s largest corporate
merger in 2020, carefully navigated
COVID and regulatory challenges
to our operations, introduced
5G technology into our network,
provided great value and service to
our customers, made good progress
on our merger integration plans,
and delivered a maiden dividend of
7.5 cents per share to shareholders.
We are better together as a merged
company, delivering increased
competition and innovation, and
enhanced network services.
TPG Telecom ends 2020 with its
synergy program on track and a
strong foundation for the future.
We are pleased to share with you
the details of our 2020 achievements
and our 2021 priorities.
Following the implementation of
the merger between the companies
formerly named Vodafone
Hutchison Australia (‘VHA’) and
TPG Telecom on 13 July 2020, we
set upon the important work of
delivering the benefits to customers
and shareholders.
Customers began benefiting from the
integration of our complementary
network assets from day one, with
additional spectrum, small cells
and fibre links boosting mobile
performance and capacity.
Under a unified and experienced
senior management team, we are
smoothly integrating the two legacy
entities. In a demonstration of our
capabilities as a merged company, we
have already secured contracts with
several large Australian companies
for mobile and fixed network services
and became the highest seller of NBN
Enterprise Ethernet since July 2020.
We are fast-tracking our 5G mobile
rollout, with 5G services now available
in more than 350 suburbs in Sydney,
Melbourne, Brisbane, Perth, Adelaide,
Canberra, the Gold Coast and
Newcastle. Customer take-up of 5G
devices has been strong and we now
have more than 425,000 5G enabled
smartphones on our mobile network.
Across our family of brands, we
have brought innovation, and more
value to customers. During 2020,
we achieved net growth of 117,000
fixed broadband subscribers and
introduced highly competitive
mobile and fixed products and
offers. We also launched Infinite Data
mobile plans with higher speed tiers
and felix, our carbon neutral, digital-
native brand.
In 2H20, we also completed the
rollout of Australia’s first city-wide
10 Gigabit network to 1,000 buildings
in Adelaide in partnership with the
City of Adelaide.
We are also leveraging our extensive
infrastructure to offer compelling
NBN alternatives to increase fixed line
margins. In the first half of 2021, we
will begin offering 5G fixed wireless
services to customers.
We are pleased with the progress
we have made, and we thank our
employees for their hard work to
deliver more every day for our
customers.
Financial performance
Our results demonstrate that
despite the impact of COVID,
especially global travel restrictions,
continued NBN headwinds, ongoing
mobile competition and regulatory
challenges, we have delivered for our
customers and shareholders.
While simultaneously completing
the merger and managing these
challenges, we were also regaining
ground following uncertainty due to
the merger delay and the 5G vendor
restrictions.
As a result of the merger, we have a
stronger balance sheet. And it says
a lot about the Group’s underlying
strength and resilience that we were
able to produce a strong cash result
and deliver a dividend in the current
environment.
As the merger was effective for
accounting purposes from 26 June
2020, TPG Telecom’s reported results
for 2020 include a full twelve months
of TPG Telecom Limited (formerly
named VHA) and a contribution of
six months and four days from TPG
Corporation Limited (formerly named
TPG Telecom).
Reported revenue for the year
increased 24 per cent from 2019
to $4.35 billion and reported
EBITDA increased by 18 per cent to
$1.39 billion.
We reported NPAT of $734 million,
which includes a one-off, non-cash
credit to income tax expense of
$820 million.
In the first six months post-merger,
the Group has generated $342 million
of net cash flow.
The TPG Telecom Board resolved
to pay a final dividend for 2020 of
7.5 cents per share.
3
We are better together as a merged
company, delivering increased competition
and innovation, and enhanced network
services.
Annual Report 20204
Chairman and CEO’s letter continued
The merger has provided the Group
with tremendous opportunities
for the future, as well as increased
ability to support customers with
the services they rely on through the
ongoing COVID pandemic.
Through the combination of our fixed
and mobile networks, we are now
an integrated telecommunications
company with the assets and skills to
be a stronger competitor to benefit
customers in all market segments,
while delivering long-term value to
shareholders.
The TPG Telecom Board and senior
management team thank you,
our shareholders, employees and
customers for the support during
the year.
David Teoh
Chairman
Iñaki Berroeta
Chief Executive Officer and Managing
Director
Becoming one company
We have always recognised that
a successful integration would be
critical for our customers, employees,
shareholders, and the future of
TPG Telecom.
It’s a big task, but we have taken it
on with enthusiasm and urgency,
leveraging the extensive experience
and talent within our company.
Every step of the way, we have made
carefully considered decisions, while
moving at pace to deliver the benefits
of the merger as quickly as possible.
The company has come together
as one organisation under a unified
senior management team and we
have made significant progress on
our integration priorities.
l On the technology side, more
than 1.8 million Australians are
benefiting from enhanced mobile
performance after we deployed
1800 MHz spectrum to around
320 sites around Australia.
l We are nearing completion of a
program to integrate over 400
small cells into the mobile network
in Sydney, Melbourne, Brisbane
and Adelaide.
l Our program to connect additional
mobile sites to dark fibre is ahead
of schedule.
l Around 60 per cent of iiNet mobile
customers have so far migrated to
the company’s mobile network.
We have made good progress, but
this is only the beginning.
Our year ahead
We head into 2021 with cautious
optimism and a continued focus
on delivering for customers and
shareholders in the short, medium
and long term.
Our plans and targets for 2021 are
ambitious and on track, which include
reaching 85 per cent 5G population
coverage in the top six cities, and
delivering more than $70 million
in cost synergies, excluding the
contribution of 5G fixed wireless
services and cross-sell revenue.
Reduced roaming revenue and the
absence of international visitors will
continue to impact our business, as
will ongoing NBN headwinds and
the introduction of the Regional
Broadband Scheme Levy. However,
we are confident that our growth
strategies and synergy program will
work to offset these.
As a merged company, we are in
a stronger position to respond to
ongoing COVID challenges and
aggressive competition in the
mobile market.
We are encouraged by improved
momentum in mobile in the last
quarter of 2020 in response to
Vodafone’s Infinite Data plans,
Vodafone’s Summer of Cricket
sponsorship and a strong iPhone
12 launch. Since November,
more than three quarters of our
postpaid handset sales were for
5G-capable devices.
With our wider suite of brands,
products and network infrastructure,
we will continue to drive innovation in
the market, maintain our competitive
market positioning and simplify
customer journeys.
And our Enterprise team will continue
to build on early success achieved
in the business and government
segments.
As a result of COVID and greater
flexibility in working arrangements,
we expect to see continued increased
take-up of higher speed NBN plans.
Overall, we have increased
confidence about our year ahead.
Thank you
2020 was a year like no other
in many ways. We are extremely
pleased about the way the multiple
and complex challenges have been
navigated. We are especially proud
that we have maintained our focus
on our customers, working every day
to enhance their network and service
experiences with us.
5
Annual Report 20206
Strategy and Performance
2020 was a monumental year, and it’s
incredible to see how much we have
achieved in just six months following
the completion of the merger.
Best High Speeds for NBN at the
Finder Awards, while Internode was
recognised as a Top 10 brand at the
Canstar Blue 10-year Awards.
While coming together as a merged
company and helping support
Australians through COVID-19, we
remained steadfast in our efforts to
serve our customers’ needs.
We have a family of award-winning
brands that customers love. In 2020,
we won a number of major customer
satisfaction awards including iiNet for
best NBN provider for the third year
in a row from Choice, Vodafone for
Best Fixed Broadband provider at the
Edison Awards and TPG for
In a further demonstration of
customer sentiment, our major
brands, Vodafone, TPG and iiNet,
have achieved consistently high Net
Promoter Score results. There was
also a substantial decrease in the
number of customer complaints
after the COVID peak, with all three
brands recording Telecommunication
Industry Ombudsman complaint rates
below the industry average in the
September and December quarters.
As a stronger full-service
telecommunications company,
we are focusing on three growth
opportunities – increasing fixed
and mobile converged household
market share, bringing more
customers onto products using our
own infrastructure and developing
our Enterprise & Government and
Wholesale business units.
We are enabling growth in these three
areas by investing in our 5G mobile
network and in the transformation of
our IT and digital infrastructure.
The strength of our company is
underpinned by our integration and
synergy program and our work to
unify our culture and organisation.
Strategic Priorities
Capitalising on strengths and opportunities to drive growth
How we will
drive growth
Bring more of our
products into even more
Australian households
Launch 5G fixed wireless
services and bring more
customers onto our
infrastructure
Increase focus on
Enterprise, Government
and Wholesale
How we will
enable growth
Continue rolling out 5G network
to reach scale in major cities
Transform IT & Digital to enhance
and simplify the customer experience
How we will
become stronger
Deliver more of the benefits of the merger to our customers and shareholders
Unify our culture, experience and organisation as one company
7
How we will drive growth
Bring more of our products into
even more Australian households
Our first growth priority is to
bring more of our products into
more Australian households. As a
merged mobile and fixed broadband
company, we have a significant
opportunity to grow our converged
households, and within those
households, to grow our mobile
customer base.
In 2020, we launched new
competitively priced and innovative
products across our major brands,
including Vodafone’s Infinite Data
plans and mobile and NBN bundles,
as well as new TPG and iiNet
mobile offers.
In 2021, we will be launching new
ways to encourage our customers
to take up more services with us
and new inclusions to enhance
their at-home experience. This
will include 4G backup on
more NBN products across our
brands, increased cross-selling
initiatives, and improvements to
sales, on-boarding and account
management journeys.
Launch 5G fixed wireless services
and bring more customers onto
our infrastructure
Our second growth priority is to
make the most of our extensive
fixed and mobile infrastructure by
bringing more on-net services to
more customers, providing them with
greater choice and value.
We are especially excited to be
bringing 5G fixed wireless services
to customers in the first half of 2021.
We are currently testing devices
using our 3.6 GHz spectrum to
ensure we deliver an exceptional
product to customers.
We also have thousands of customers
connected to 4G fixed wireless
services through the Vodafone brand
in areas where we have spare 4G
network capacity, and have started
expanding this service to the TPG
and iiNet brands.
In 2021, we will continue investing in,
and maximising the value from, our
on-net fixed access infrastructure.
Our Fibre to the Basement network,
which delivers typical evening
speeds of 90 megabits per second,
is available to almost 3,000 multi-
dwelling buildings and over 200,000
premises across major metropolitan
areas. Previously available on TPG
and iiNet only, we recently launched
FTTB products on Internode.
Our HFC services are sold through
the iiNet brand, and are superior
to the majority of the alternative
services offered in these locations.
Our VDSL network delivers typical
evening speeds of 74 megabits per
second and covers around 90,000
premises in the ACT, with services
offered through the iiNet brand.
The NBN Connectivity Virtual
Circuit (CVC) wholesale pricing
model continues to be a challenge
for all NBN retailers. We continue
to advocate to NBN Co and the
Government for a flat rate and
the removal of the CVC. Until a
sustainable model is implemented,
we will continue to manage our
NBN plan mix to maximise margins.
Increase focus on Enterprise &
Government and Wholesale
The provision of combined mobile
and fixed solutions to the enterprise,
government and wholesale sectors is
a significant growth opportunity for
TPG Telecom.
In 2020, we brought the Enterprise
and Government teams together.
Equipped with both solutions, know-
how and deep customer focus,
the Enterprise & Government team
quickly won several major tenders.
During the year, we announced an
agreement to provide fixed and
mobile network services to National
Australia Bank.
In partnership with the City of
Adelaide, we completed the rollout
of 10 Gigabit Adelaide, Australia’s
first city-wide 10 Gigabit network
to 1,000 buildings in the city. We
are providing services exclusively
to hundreds of business entities
ranging from research institutes to
eCommerce, medical, IT software
engineering and educational
institutions.
In 2021, our Enterprise & Government
priorities include providing products
and services that meet the needs of
government agencies and businesses
of all sizes, and deepening our focus
on the total customer experience we
provide. We will continue to: drive
on-net data in our existing fibre
footprint; connect new businesses
to the high speed, dedicated and
symmetric NBN Enterprise Ethernet
fibre product; and provide mobiles,
including mobile back up, to support
fixed fibre networks.
Our efforts will be supported
by investment in building brand
awareness of our full-service suite
of telecommunications products
and services to business, enterprise
and government; and expanding our
existing SD-WAN, Managed Service,
Security, 5G and IoT propositions.
In 2020, we also brought the legacy
VHA and TPG wholesale sales and
carrier teams into an independent
business unit to maximise the
potential for standalone growth in
wholesale. The combination of legacy
VHA’s MVNO wholesale capability
with the AAPT Wholesale business
brings a third converged wholesale
infrastructure challenger to the
Australian market for the first time.
The new TPG Telecom Wholesale
business offers an extensive range
of products and services ranging
from MVNO access to Application-to-
Person (‘A2P’) SMS, FTTB, enterprise
fibre services, consumer and
enterprise NBN, and domestic and
international capacity.
Our Wholesale focus for 2021 is
to grow the wholesale business,
increase the utilisation of our
extensive network assets, and drive
synergies and long-term value in our
carrier partner agreements.
Annual Report 20208
Strategy and Performance continued
How we will enable growth
Continue rolling out 5G to reach
scale in major cities
2 Gigabits per second. The Australian
Communications and Media Authority
will auction 2.4 GHz of spectrum in
the 26 GHz band in April.
In 2020, we finalised the building
blocks for our 5G future and
commenced the rollout of our
5G mobile network with our RAN
and transmission partner, Nokia.
Our partnership with Nokia is
underpinned by our long-term
arrangement to access Axicom’s
portfolio of tower assets and our
joint venture agreement with Optus.
These agreements, supported by
our maintained level of capital
expenditure, will enable us to deploy
5G efficiently, to more places and
with a competitive cost structure.
We know customers are excited about
5G, and we’re excited to be rolling it
out across Australia as the first of our
key enablement priorities.
Last year, total data traffic on our
mobile network grew 12 per cent to
611 million Gigabytes (‘GB’) from
545 million GB in 2019 as customers
continued to stream, browse and
share more on their smartphones,
mobile devices and tablets.
We now have 5G services switched
on in parts of Sydney, Melbourne,
Brisbane, Adelaide, Perth, Canberra,
the Gold Coast and Newcastle.
5G is available in more than 350
suburbs across these major metro
areas and we currently have around
1,600 sites in the planning and
design phase.
Using our 3.6 GHz spectrum and
700 MHz spectrum, together with
a new standalone core, we are
targeting more than 85 per cent
5G network population coverage in
the top six Australian cities by the
end of 2021.
Millimetre wave spectrum will
accelerate the potential of 5G,
especially for mobile services in
high foot-traffic areas and for fixed
wireless services. It will provide
significantly increased capacity and
enable faster data speeds. In 2020,
we completed trials on the 28 GHz
band, reaching speeds of around
As our 5G network reaches scale,
we will offer new products and
experiences so customers can make
the most of the higher speeds, lower
latency and more data connections
that 5G supports.
While we are accelerating our 5G
rollout to bring next generation
services to customers as soon as
possible, Australians will still be
relying on 4G for some years to
come. To continue meeting customer
demand, we will be enhancing the
4G experience including expanding
Voice over LTE capability and
virtualising our mobile network for
agility and scalability and to support
new use cases.
Transform IT and Digital to
enhance and simplify the
customer experience
Consumer trends and COVID are
changing the way customers want to
interact with us. The transformation
of our IT and digital infrastructure is
our second enablement priority as we
focus on enhancing and simplifying
the customer experience.
In 2020, the number of customer
care enquiries on the Vodafone brand
that involved web chat increased
by more than 75 per cent from
2019. Take-up of the MyVodafone
app continues to increase, with the
app now downloaded to more than
1.6 million active devices.
In 2020, we also lifted online sales
mix by three to five percentage
points across our major Consumer
brands.
We refreshed our Vodafone website
to improve the customer journey,
with a particular focus on becoming
more mobile-friendly. Improvements
include enabling customers to
compare plans more easily and a
simplified check-out experience. We
also launched a new My TPG app
and an improved iiHelp self-support
online tool for iiNet customers.
In 2021, we will continue to support
the shift towards online activity
across our brands to give customers
more choice around how they engage
with us and manage their account.
We are also integrating our IT
architecture to rationalise systems,
and support cross-selling and on-net
initiatives across our brands. This
will enable us to improve our time-
to-market, streamline the customer
experience within and across
our channels, simplify back-end
processes, empower our employees
and ultimately allow us to better
understand and serve our customers.
How we will become stronger
Deliver more of the benefits of
the merger to our customers and
shareholders
We are building a strong foundation
for the future, with our continued
focus on delivering our integration
and synergy programs.
Since day one of the merger, we have
deployed our 1800 MHz spectrum to
318 mobile sites to benefit around
1.8 million Australians and migrated
around 60 per cent of iiNet mobile
customers onto our mobile network.
We are pleased to share that our
program to integrate almost 400
small cells into the mobile network
in major cities is nearing completion,
and we are ahead of schedule in
connecting dark fibre to over 700
mobile sites.
In 2021, we expect to achieve
approximately $70 million in cost
savings, excluding the contribution of
fixed wireless services and cross-sell
revenue, as we continue to deliver
the synergies from the merger. Our
cost synergies ambition includes
mobile network backhaul savings,
the continued migration of iiNet
customers, and other operating
efficiencies across technology,
infrastructure, property and
marketing.
By 2023, we expect our synergy
program to deliver between $125 to
$150 million of annual cost savings.
9
Fixed wireless is expected to be
an additional sizeable opportunity.
Based on current NBN wholesale
costs, the successful migration of
every 100,000 NBN customers back
onto on-net infrastructure would
represent approximately $50 million
of annualised cost savings for the
Group.
Further, we expect increased cross-
selling activities to our fixed and
mobile bases across Consumer
and Enterprise to generate revenue
synergies.
Unify our culture, experience and
organisation as one company
The foundation of our company is
our people. We now have a family
of over 5,000 employees across our
operations.
United by a challenger spirit, our
legacy businesses share a common
cause in driving competition and
bringing innovation to the Australian
telecommunications market. Across
our company, we share a belief
and confidence that we are better
together.
We are integrating our Group
functions and senior management
layer into a simplified structure which
best serves our customer segments,
as well as driving value and
performance from our Group assets.
Our executive team is now complete
with the recent appointments of
Kieren Cooney and Elizabeth Aris,
who will lead our Consumer and
Enterprise segments through the next
phase of growth.
2020 presented no challenge too
big to overcome in completing our
merger. Our office-based workforce
continues to work from the office
or remotely, whichever helps our
people to work effectively and be
at their best. This has enabled us to
bring more teams together in an agile
manner in common physical spaces,
whilst beginning to consolidate our
commercial office footprint.
Ultimately, our goal is for TPG
Telecom to be an employer of
choice. Together, we are working
on building a vibrant and inclusive
environment for our people: one
which acknowledges that we grow
stronger with diversity, flexibility and
respect in the workplace. We are
progressively creating a common
culture and way of working which
capitalises on our organisational
strengths and streamlines cross-
functional collaboration.
In 2021, we will increase our focus on
growing future leaders and attracting
new talent, as well as harmonising the
end-to-end employee experience.
We are pleased with our progress so
far and excited about the future as we
continue the integration journey as
one company.
Annual Report 202010
Strategy and Performance continued
Supporting our customers,
employees and the community
Our strong actions to support
Australians as they spent more
time at home during 2020 ensured
connectivity for our customers while
also helping to protect the health and
wellbeing of our community.
Our customers
2020 was a challenging year for
many of our customers as their
circumstances changed dramatically.
It highlighted the critical role
telecommunications plays in our
society as Australians relied on
our services more than ever to
work and learn from home and
for social connection.
We worked hard to support our
customers with a range of initiatives.
On the Vodafone brand, these
included a temporary $10 Stay
Connected plan for customers
experiencing financial difficulty,
additional data allowances,
unlimited standard national calls, and
pausing of late payment fees and
collections. In addition, Vodafone
provided two months’ free access
for frontline health workers, and the
free rating of government and health
websites. Vodafone also supported
low-income families through NBN
Co’s Education Assistance Package
so school-aged children could access
home schooling.
At the start of the year, when
Australians faced the devasting
summer bushfires, Vodafone offered
a two-months free mobile service to
a range of frontline volunteers, a free
mobile Wi-Fi option to assist those
who lost their homes and, additional
data for customers in bushfire-
affected areas, payment support
or relief options, and a matched
donation program. TPG helped keep
schools, staff and students connected
with high-speed dedicated fibre.
COVID-19 made us all think
differently and we had to respond
quickly to continue to support
customers and their services. The
enablement of remote working
for contact centre employees and
temporary redeployment of retail,
support and field employees to
contact centre roles helped us to
quickly restore service capacity
levels following the impact from strict
lockdowns in Mumbai, Pune, Manila
and Cape Town.
To continue supporting customers
to stay connected during local
lockdowns, Vodafone was the first
provider to set up a non-contact click
and collect model for its retail stores.
This model enables us to continue
providing diagnostic services for
critical issues such as replacing
a faulty SIM that cannot be done
online. It worked well in the first
Melbourne lockdown and we have
used this model successfully in other
states.
We also accelerated our Digital
strategy, including boosting
Vodafone’s web chat capability.
As a result, the proportion of digitally
assisted interactions doubled from
2019 to 2020.
Our employees
We continue to take an agile
approach to working arrangements
for office-based employees. This
means we can respond immediately
and with an abundance of caution to
any COVID-related health risks in the
community.
While COVID risks are low, there
is no one-size-fits-all working
model. We empower our people to
make decisions about how to best
structure their working week to
suit their work responsibilities and
personal circumstances. Some tasks
and roles are best performed in a
collaborative workplace environment,
while others might be better suited to
a home office.
This year, we also enabled remote
working for our contact centre
employees for the first time, and now
that the model has been proven, it
gives us flexibility for the future.
As telecommunications is considered
an essential service, most Vodafone
retail stores are open with social
distancing and increased hygiene
measures in place.
To support our employees who
may need time off to meet family
commitments or for health reasons,
an additional ten days of leave is
available.
Our community
We take our role and responsibilities
in the community very seriously.
In 2020, the Vodafone Foundation
re-purposed its DreamLab app
to support a research project by
The Imperial College of London to
fight COVID-19. The research is
examining whether existing drugs
and anti-viral molecules in foods
can be used for COVID treatments.
The DreamLab app, which speeds
up medical research sending tiny
pieces of research puzzles to a user’s
smartphone while they sleep for
processing, recently reached one
million downloads globally.
As the first step in our broader
sustainability strategy which focuses
on the significant issues for our
society, we launched a new mobile
brand, felix, in late 2020. felix is
carbon neutral and 100 per cent
powered by renewable electricity. In
partnership with One Tree Planted,
felix is planting one tree per month
for every active customer.
The company has also extended its
sponsorship activities to increase
brand awareness to broader
audiences. Among its suite of
partnerships, Vodafone became the
Official Platinum Partner of Cricket
Australia, naming rights partner of
Men’s Test Match and League Partner
of the Women’s Big Bash League
(‘WBBL’). iiNet continued as the
principal partner of the Hawthorn
Football Club and the Sydney Sixers,
and Vodafone is proud to continue
as the Official & Exclusive Mobile
Service Sponsor of the Sydney Gay
and Lesbian Mardi Gras Festival.
11
Annual Report 202012
Key Risks
Overview
At TPG Telecom, we recognise that it
is essential that risks are consistently
and proactively managed and we
strike the right balance between
managing risk and achieving
business objectives.
We are committed to the ongoing
development of a strategic and
consistent approach to risk
management underpinned by a
risk aware culture. By continually
identifying, monitoring and assessing
risks we are able to put in place
appropriate controls and actions to
allow us to achieve our core objectives.
We understand that identifying and
managing risk is a fundamental duty
to our shareholders, customers,
employees and other stakeholders.
While the board and board
committees have oversight of risk
issues, and the company’s Executive
has responsibility for managing risks,
all TPG Telecom employees play a
key role in ensuring effective risk
management is in place.
Below is a summary of the key risks
that have been identified for TPG
Telecom. These are not in priority
order and are not an exhaustive list of
risks we have identified and monitor.
Key Risks
Network Capability and
Performance
Customers rely heavily on the
availability and performance of our
mobile and fixed networks. Network
congestion and outages lead to poor
customer experience and negatively
impact our reputation and customer
trust. The COVID-19 pandemic has
highlighted the critical role that our
sector plays and has reinforced
the importance of strong, resilient
telecommunication companies. Our
networks have kept family and friends
connected, allowed businesses to
continue operating through remote
working arrangements and facilitated
online orders while offices and stores
were closed.
The potential of failures across
our networks caused by human
error, accidental damage, power
loss, weather conditions, natural
disasters including bushfires,
physical or cyber security breaches
or vandalism could cause significant
disruption to our business resulting
in financial loss, increased customer
attrition and possible legal liability.
Furthermore, our ability to operate
a competitive telecommunications
business is dependent upon access
to sufficient spectrum, equipment
and network infrastructure. If we
were unable to acquire, renew or
otherwise secure sufficient spectrum,
equipment or network infrastructure
at an acceptable price, our ability
to provide services to customers
economically and efficiently may limit
revenue growth and profitability.
We have, and continue to, invest
significantly in network capability
and performance. Our network
performance is closely and
continually monitored, and we
have a robust emergency and crisis
management response plan in place
to respond to incidents.
Following the Australian Government
restrictions on the use of perceived
high-risk network vendors, we
partnered with Nokia to build our 5G
mobile network. We are accelerating
our rollout of the 5G network with
a target to cover 85 per cent of the
population in the top six cities by the
end of 2021. We also work closely
and proactively with the Australian
Government and the Australian
Communications and Media Authority
(‘ACMA’) to seek access to adequate
spectrum.
Competitive Industry and
Market Disruption
We operate in a highly competitive
marketplace where strong price
competition, increasing demand
for data and the high cost of
network investment challenge our
ability to sustain revenue growth,
increase brand consideration
and increase market share. The
telecommunications industry is
particularly susceptible to rapid
change, due to technological
innovation, changing consumer
trends and rapidly evolving
industry practices.
Innovation and disruptive
technologies may cause market
discontinuity which may in turn
adversely impact our business models
where there is a failure to transition
and adapt quickly. We must continue
to develop, adopt and integrate the
latest technologies into our existing
infrastructure or we may lose market
share resulting in reduced revenue
and profits.
To mitigate this risk, we continuously
review and update our products and
services to maintain innovative and
competitive offerings. We are also
transforming our digital services
to deliver an improved customer
experience at a lower cost base.
Our technology experts monitor
technological developments and
emerging trends and work with global
technology providers to capitalise on
these opportunities.
Cyber Security and Data
Protection
Cyber threats are constantly
evolving, with heightened threats
from international groups with
sophisticated phishing scams and
cyber attacks, who are targeting
individuals and Australian companies.
Legacy IT systems in particular may
contain vulnerabilities and provide
opportunities for cyber attacks.
These attacks have the potential to
cause significant service interruption
or compromise customer data
privacy. The COVID pandemic has
heightened the general risk of cyber
threats as opportunistic cyber
criminals have quickly adapted their
methods to exploit an increase in the
use of online services.
TPG Telecom manages a significant
volume of sensitive information.
Customers, employees and third
parties expect us to use the highest
levels of security to protect their
personal information. The legal and
regulatory environment regarding
information security is increasingly
13
complex and demanding. Failure
to protect personal information
could result in reputational damage,
regulatory scrutiny and financial loss.
This could result in compensation
claims from customers, penalties
by regulators or authorities and
customer losses.
Our IT transformation program is
aimed at increasing the resilience,
stability, and performance of
our architecture. The program is
supported by a strong governance
framework to minimise impacts to
the business and ensure we meet our
anticipated targets.
We always seek to handle personal
data honestly, ethically, with integrity
and in accordance with applicable
laws. We are committed to creating
a strong security culture and
provide mandatory annual training
to ensure our people understand
our obligations and are equipped to
respond to cyber and privacy events
appropriately. We conduct regular
internal testing to ensure this training
is effective. We take a Privacy-
By-Design approach and seek to
continuously improve our controls
environment. We undertake multiple
initiatives throughout the year to
improve our cyber security and
data security posture and continue
to implement strong compensating
controls to manage risks associated
with the transition of our workforce
to remote working.
Technology Stability and
Resilience
We rely heavily on information and
communications technology for the
delivery of our services and we have
invested significantly in technology to
maximise the efficiency of operations.
Issues such as service interruptions
or unavailability may arise if these
systems are inadequately maintained,
secured and updated or are damaged
due to accidents, deliberate attacks
or natural disasters. In particular,
legacy IT with unsupported
software versions may contain
potential vulnerabilities and provide
opportunities for cyber attacks.
Additionally, our IT transformation
programs may cause unexpected
disruptions, fail to provide
anticipated benefits or otherwise be
unsuccessful. These disruptions could
result in impacts on our reputation,
customer retention, revenue, or costs.
We have implemented target
objectives for recovery of critical IT
systems and our recovery plans that
are regularly reviewed and tested. We
are focusing on upgrading IT systems
by removing outdated technologies
and updating systems to supported
versions.
Legal and Regulatory Risk
We operate in a highly regulated
industry with complex and evolving
legal requirements. We always
seek to comply with all applicable
legal and regulatory obligations.
Through strong compliance and
legal risk management we minimise
the risk of reputational damage,
fines and penalties, withdrawal or
cancellation of licences, suspension
or termination from trading on
the ASX and litigation. The highly
regulated environment exposes us
to risks of changes to regulatory
policy and other government
interventions which could impact
our financial performance or the
commercial viability of existing or
proposed projects or operations.
As an example, the adoption of the
Telecommunication Sector Security
Reform and the subsequent Australian
Government ban of Huawei in 5G
networks continue to have an effect
on our business.
TPG Telecom has subject matter
experts within key business areas
who provide oversight, support
compliance monitoring and are
able to respond to emerging issues.
A culture of compliance is established
with policies, codes and training
and awareness initiatives which
ensure our people are adequately
equipped to understand and manage
our compliance obligations. We also
have subject matter experts within
our legal and regulatory teams and
external legal advisors to advise
on emerging regulatory issues and
advocate for our interests if legal or
regulatory changes may impact our
business.
Macroeconomic Risk
Our financial performance may be
impacted by various macroeconomic
factors. Unfavourable macroeconomic
conditions, global trade conflicts
and restrictions and major economic
disruptions could result in reduced
demand for our services, restrict
our ability to develop, adopt and
integrate the latest technologies,
impact our key suppliers’ ability to
provide services, increase borrowing
costs or restrict the availability of
debt financing.
The COVID pandemic has impacted
our business in several ways
including reduced customer
access to retail stores, lower
international roaming revenues, lack
of international students, revenue
impact from customer support
initiatives and suspension of late
payment fees and collection activities
during the height of the pandemic.
These impacts are likely to have a
negative impact on our financial
performance until the situation
returns to pre-COVID conditions.
To mitigate this risk, we take a
conservative approach to financing
and work effectively and proactively
in partnership with lenders. Our
annual budget and long-range
planning processes also take into
account potential changes to
macroeconomic conditions.
People Risk
The health, safety and wellbeing
of our staff at our retail, corporate
and technology sites is paramount.
Physical security vulnerabilities,
inappropriate behaviour towards
front-line staff, failure to maintain
and secure infrastructure, failure
to comply with EME policies and
regulations, and failing to provide an
inclusive and respectful corporate
environment all present potential
health and wellbeing risks. Integrating
business units and developing a
Annual Report 2020We have been working on programs
to reduce energy usage in our
networks and have contributed
further to emissions reductions by
launching felix mobile, Australia’s
first telecommunications brand
to be powered by 100 percent
renewable energy.
TPG Telecom has a strong corporate
governance framework that complies
with the legal and regulatory
requirements. Our employee and
board policies, charters and codes
are regularly reviewed to ensure
our strong conduct, culture and
governance framework meets the
changing risk environment and
increasing stakeholder expectations.
14
Key Risks continued
strong unified culture were identified
as key requirements following the
merger in mid-2020 and failure to
achieve those objectives may result
in loss of performance and lower staff
retention. Failure to manage these
risks could impact our reputation,
inhibit our ability to attract and retain
talent and expose us to regulatory
action or litigation.
During the COVID pandemic, we
moved quickly to protect the safety
and wellbeing of our employees,
customers and contractors including
increasing working from home
arrangements for most office-and
contact centre staff, the temporary
closure of at-risk retail stores,
implementing social distancing
measures and enhancing professional
cleaning and hygiene measures at
all locations.
We continue to prioritise the mental
health and well-being of our people
particularly during the uncertainty of
COVID restrictions and lockdowns.
Careful monitoring and increased
Executive communication has
assisted to minimise these health,
safety and wellbeing risks.
We are also committed to providing
a safe, flexible and respectful
environment for employees and
customers, free from all forms of
discrimination, bullying and sexual
harassment. We focus on creating
a cohesive culture in the newly
merged business and have policies
and processes in place to attract and
retain key talent.
Sustainability
We believe that managing
environmental and social risks is
important to maintaining long term
value for shareholders. Climate
change is a challenge creating
risks to industries, societies and
economies across the globe. As
an owner and operator of national
telecommunications infrastructure we
recognise that failure to manage and
respond to the direct and indirect
impacts of climate change presents
risks to our business. Climate change
will increase our exposure of damage
to our infrastructure (for example,
increases in extreme weather and
bushfires), financial risk (for example,
additional costs of regulation,
potential litigation and increase
in energy costs) and reputational
risk (for example, failure to meet
stakeholder expectations).
Additionally, failure to adapt to
meet changing societal, customer,
employee and stakeholder
expectations about corporate
behaviour and standards may lead
to reputational damage, regulatory
inquiries or shareholder actions.
Our operations teams build network
resilience and redundancy against
environmental risks. Our subject
matter experts ensure our mobile
and base stations comply with
international and national safety
limits. Our sustainability experts
help to identify climate change risks
that impact our business and plan
appropriately for the future.
15
Operating and Financial Review
1. Introduction and business overview
TPG Telecom is a provider of telecommunications services to consumers, business, enterprise, government and
wholesale customers in Australia.
The Group owns significant network infrastructure throughout Australia (as well as a subsea cable connecting
Australia to Guam with onward connectivity into the US and Asia) that facilitates the provision of fixed and mobile
telecommunications services.
The Group markets its services through multiple well-known brands including Vodafone, TPG, iiNet, Lebara, Internode
and AAPT.
The Group has over 5,000 employees across Australia, New Zealand and the Philippines and the business is also
supported by outsourced service centres in India and South Africa.
2. Merger with TPG Corporation
The merger of the Company and TPG Corporation became effective for accounting purposes on 26 June 2020 and was
completed on 13 July 2020.
The merger brings together two highly complementary businesses to create a leading integrated, full-service
telecommunications company with a comprehensive portfolio of fixed and mobile products for its customers.
The merger was implemented through a Scheme of Arrangement under which the Company acquired all of the shares in
TPG Corporation in return for issuing shares in the Company to TPG Corporation shareholders.
The Scheme was approved by the Supreme Court of New South Wales on 26 June 2020 and became effective for
accounting purposes on that day, being the deemed date of effective control. The Scheme was implemented on
13 July 2020 when the agreed number of shares in the Company were issued to TPG Corporation shareholders.
TPG Corporation Limited changed its name from TPG Telecom Limited and was suspended from trading on the ASX on
29 June 2020, and the Company changed its name from Vodafone Hutchison Australia Limited to TPG Telecom Limited
on 29 June 2020 and listed on the ASX on 30 June 2020.
3. Composition of reported results for the year ended 31 December 2020
As a result of the structure and timing of the merger, the Group’s Consolidated Income and Cash Flow Statements
for the year ended 31 December 2020 include a full twelve months of results of the company formerly known as
VHA plus a contribution of six months and four days from TPG Corporation (between the accounting effective date and
31 December 2020).
The 2019 comparative year in the financial statements comprises just the results of the company formerly known as VHA,
and therefore any comparison between the Group’s 2020 and 2019 results is impacted by the merger.
Therefore, in order to assist users of the accounts to obtain a better understanding of the underlying performance of the
Group, the Company has separately prepared pro forma results for 2020 and 2019 simulating what the Group’s results
would have been if the merger had been effective throughout both years. These pro forma results are included in a
Financial Results Commentary and Investor Presentation that have been separately posted on the ASX on 25 February
2021 and are also available on the Group’s website at www.tpgtelecom.com.au/investor-relations.
4. Analysis of reported results for the year ended 31 December 2020
Whilst acknowledging the limitations described above of comparing the reported results of 2020 and 2019 due to the
impact of the merger, the following sections provide an overview of the reported results.
Users of the accounts seeking to obtain a better understanding of the underlying performance of the Group may like
to also refer to the pro forma results included in the 2020 Financial Results Commentary and Investor Presentation
available on the Group’s website at www.tpgtelecom.com.au/investor-relations.
Annual Report 202016
Operating and Financial Review continued
4.1 Consolidated Income Statement Overview
NOTE
2020
$m
2019
$m
CHANGE
$m
Revenue
Service revenue
Handset revenue
Total revenue
Other income
Cost of telco services
Cost of handsets sold
Employee benefits expense
Other operating expenses
EBITDA
Depreciation and amortisation
Operating profit
Net financing costs
Loss before tax
Income tax benefit/(expense)
Profit/(loss) after tax
Attributable to:
Owners of the Company
Non-controlling interest
Earnings per share (cents)
1
2
3
4
3,479
871
4,350
11
(1,388)
(855)
(328)
(399)
2,406
1,107
3,513
10
(695)
(1,102)
(232)
(316)
1,391
1,178
1,073
(236)
837
1
(693)
247
(96)
(83)
213
(1,188)
(1,021)
(167)
203
157
(289)
(437)
(86)
(280)
–
46
148
194
820
820
734
741
(7)
64
(280)
1,014
(280)
1,021
–
(7)
(68)
132
17
1. Earnings before net financing costs, tax, depreciation and amortisation (‘EBITDA’)
The Group’s EBITDA, including six months and four days contribution from TPG Corporation, was $1,391 million,
$213 million higher than 2019.
Service revenue and operating expenses all increased substantially due to the inclusion of TPG Corporation’s results.
However, handset revenue and the associated cost of handsets sold both decreased, reflecting a lower volume of
mobile handsets sold by the legacy VHA business in 2020. TPG Corporation does not sell mobile handsets.
2. Depreciation and amortisation
Depreciation and amortisation expense increased by $167 million in 2020. This increase includes $82 million of
amortisation relating to the TPG Corporation acquired customer base that has been recognised as an intangible asset
in the Group’s balance sheet as a result of the merger acquisition accounting. This is an accounting expense that has
no associated cash outflows.
The remainder of the increase is driven by depreciation/amortisation of TPG Corporation’s property, plant and
equipment and intangible assets (including spectrum licences) acquired through the merger. Partially offsetting this
increase was a decrease in depreciation expense in the legacy VHA business in the year largely due to the fact that
a right-of use asset in respect of a fibre agreement that VHA had with TPG Corporation before the merger has now
been eliminated on consolidation (refer to balance sheet commentary below).
3. Net financing costs
Net financing costs decreased by $148 million in 2020. This was driven primarily by the fact that, as reflected
in the balance sheet below, the Group’s borrowings were $2,668 million lower as at 31 December 2020 than at
31 December 2019.
The reduction in debt in the year was a function of (a) the debt restructure that occurred as part of the merger
implementation in July 2020, under which $4,475 million of debt was removed from the Company and assumed
by the Company’s pre-merger shareholders; (b) the $2,526 million of debt that TPG Corporation had at date of
acquisition (after paying the $479 million special dividend to its pre-merger shareholders); and (c) debt repayments
made from cash generated from operations. The $289 million of net financing expenses for 2020 includes six months
of interest incurred on the higher level of debt that existed pre-merger completion.
4. Income tax
The Group’s 2020 income statement includes an $820 million accounting credit to income tax expense which has
arisen due to the recognition of deferred tax assets in respect of carried forward tax losses not previously recognised
in the Company’s accounts and in respect of temporary timing differences between book and tax accounting.
As at 31 December 2019, the Company had not recognised any additional deferred tax assets beyond its deferred tax
liabilities in its balance sheet because, as a loss making entity with no certainty of generating taxable profits in future
years, the Company didn’t meet the accounting criteria necessary for recognition of deferred tax assets.
Following the merger, the Group is generating (and is expected to continue generating) taxable profits, and these
deferred tax assets have therefore been brought to account at 31 December 2020, giving rise to the one-off
accounting credit to income tax expense.
Annual Report 202018
Operating and Financial Review continued
4.2 Consolidated Balance Sheet Overview
Set out below is a condensed version of the Group’s balance sheet as at 31 December 2020, summarised in a manner to
highlight some key points.
A comparison of the 31 December 2020 and 31 December 2019 balance sheets is materially affected by (a) the fact that
the 31 December 2020 balance sheet includes TPG Corporation’s assets and liabilities acquired through the merger and
(b) the issue of shares and debt restructure that occurred as part of the merger implementation. Commentary on some
of the material movements and balances is set out below the table.
NOTE
2020
$m
2019
$m
CHANGE
$m
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Assets held for sale
Other current assets
Total current assets
Property, plant and equipment
Right-of-use assets
Spectrum licences
Other intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Trade and other payables
Borrowings
Lease liabilities
Other current liabilities
Total current liabilities
Borrowings
Lease liabilities
Other non-current liabilities
Total non-current liabilities
Net assets
Contributed equity
Reserves
Total equity
1. Net debt
1
1
2
3
4
5
6
7
1
1
4
8
120
431
–
2
130
683
3,258
1,012
2,325
11,144
264
138
734
391
130
–
167
1,422
1,865
1,454
1,161
2,768
–
77
(614)
40
(130)
2
(37)
(739)
1,393
(442)
1,164
8,376
264
61
18,141
7,325
10,816
927
–
92
437
1,035
5,255
84
255
(108)
(5,255)
8
182
1,456
6,629
(5,173)
4,330
1,051
95
5,476
1,743
1,544
34
3,321
2,587
(493)
61
2,155
11,892
(1,203)
13,095
18,399
(6,507)
11,892
6,047
(7,250)
(1,203)
12,352
743
13,095
As at 31 December 2020, the Group had net borrowings of $4,210 million (borrowings of $4,330 million less cash of
$120 million) down from $6,264 million (borrowings of $6,998 million less cash of $734 million) as at 31 December
2019. This $2,054 million reduction in borrowings reflects (a) the debt restructure that occurred as part of the merger
implementation in July 2020, under which $4,475 million of debt was removed from the Company and assumed
by the Company’s pre-merger shareholders; (b) the $2,526 million of debt that TPG Corporation had at date of
acquisition (after paying the $479 million special dividend to its pre-merger shareholders); and (c) debt repayments
made from cash generated from operations.
The $130 million of derivative financial instruments as at 31 December 2019 represented cross currency swaps
associated with the pre-merger borrowings that were assumed by the Company’s pre-merger shareholders as part of
the debt restructure upon merger implementation.
19
2. Assets held for sale
As at 31 December 2020, the Group, through TPG Corporation, held a 60% interest in the Tech2 Group Pty Ltd. TPG
Corporation had acquired this interest through its acquisition of iiNet in 2015. Tech2 is primarily in the business of
providing installation services in the telecommunications and other technology space and in 2020 contributed a small
loss to the Group’s results.
Following the merger, it was determined that Tech2 was a non-core part of the Group’s business and in February
2021 the Group completed a transaction to dispose of its interest in Tech2.
The fair value of Tech2’s net assets were therefore disclosed as held for sale as at 31 December 2020. The fair valuing
of Tech2’s net assets gave rise to a $9 million impairment expense which is included within other operating expenses
in the Group’s 2020 consolidated income statement.
3. Property, plant and equipment (‘PP&E’)
PP&E as at 31 December 2020 was $3,258 million, an increase of $1,393 million compared to 31 December 2019,
driven by the fact that TPG Corporation’s acquisition balance sheet included PP&E fair valued at $1,491 million.
Excluding the addition of TPG Corporation assets, the PP&E balance reduced by $98 million in the year, which is
explained by net PP&E additions of $557 million, less transfers (to intangible assets) of $125 million and depreciation
expense of $530 million.
4 Right-of-use assets and lease liabilities
Right-of-use assets and non-current lease liabilities declined by $442 million and $485 million respectively
notwithstanding that the 31 December 2020 balances include the addition of TPG Corporation assets and liabilities.
The reason for this unusual movement is that, prior to the merger, the Company recognised in its balance sheet
a right-of use asset and corresponding liability in respect of a fibre agreement with TPG Corporation which,
subsequent to the merger, has been eliminated on consolidation.
5. Spectrum licences
The net book value of spectrum licences held by the Group as at 31 December 2020 was $2,325 million, an increase
of $1,164 million compared to 31 December 2019, driven by the fact that TPG Corporation’s acquisition balance
sheet included spectrum licences fair valued at $1,095 million. Excluding the addition of TPG Corporation spectrum,
the Group’s spectrum balance increased by $70 million in the year, which is explained by a $257 million addition of
3.6 GHz spectrum acquired through the joint venture between the Company and TPG Corporation, less $187 million
of amortisation expense.
6. Other intangible assets
Excluding spectrum licences, other intangible assets increased in the year by $8,376 million to $11,144 million.
The three main components of this increase, all related to the merger acquisition accounting, are (a) the acquired
TPG Corporation customer base fair valued at $1,607 million, (b) the $424 million fair value of TPG Corporation
brands acquired, and (c) goodwill arising from the merger of $6,155 million.
7. Deferred tax assets
As at 31 December 2019, the Company had not recognised any deferred tax assets (beyond the set off against
deferred tax liabilities) in its balance sheet because, as a loss making entity with no certainty of generating taxable
profits in future years, the Company didn’t meet the accounting criteria necessary for recognition of deferred tax
assets.
Following the merger, the Group is generating (and is expected to continue generating) taxable profits, and a net
deferred tax asset of $264 million has been recognised as at 31 December 2020, comprising the following principal
components:
(a) A deferred tax asset relating to carried forward tax losses, not previously recognised, of $590 million;
(b) Deferred tax liabilities acquired through the business combination with TPG Corporation of $557 million; and
(c) Other net deferred tax assets of $231 million primarily representing temporary timing differences between book
and tax accounting.
8. Contributed equity
Contributed equity as at 31 December 2020 of $18,399 million is $12,352 million higher than as at 31 December
2019. This increase represents (a) equity issued to the Company’s pre-merger shareholders related to their
assumption of part of the Company’s debt as part of the pre-merger debt restructure ($4,475 million), and (b)
equity issued to TPG Corporation shareholders in respect of the Company’s acquisition of all of the shares in
TPG Corporation ($7,877 million).
Annual Report 2020
20
Operating and Financial Review continued
4.3 Consolidated Cash Flow Statement
A comparison of the Group’s 2020 and 2019 cash flow statements is affected by (a) the fact that 2020 includes a six
month and four day contribution from TPG Corporation compared to zero contribution from TPG Corporation in 2019;
and (b) cash flows in 2020 related to the merger transaction. A condensed version of the cash flow statement is set out
below together with some commentary below the table highlighting some key points.
Operating cash flow
Capital expenditure
Mobile spectrum payments
Net cash acquired through merger
Disposal of subsidiary (net of cash disposed)
Cash reclassified within assets held for sale
Transaction costs re merger
Net cash flow before financing activities
Net drawdown/(repayment) of borrowings
Lease repayments
Net finance costs paid
Pre-acquisition dividends paid to TPG Corporation shareholders
Net cash flow
1. Operating cash flow
NOTE
1
2
3
4
5
6
7
8
2020
$m
1,188
(612)
(204)
99
(379)
(7)
(37)
48
186
(130)
(239)
(479)
(614)
2019
$m
1,296
(542)
(76)
–
–
–
(17)
661
(171)
(112)
(287)
–
91
CHANGE
$m
(108)
(70)
(128)
99
(379)
(7)
(20)
(613)
357
(18)
48
(479)
(705)
Operating cash flow of $1,188 million was $108 million lower than in 2019 despite the fact that 2020 included the
six month and four day contribution from TPG Corporation. This is principally explained by the timing of material
payments to suppliers of mobile handsets that were acquired by the Company in late 2019 but paid in early 2020.
This boosted 2019 operating cash flows by approximately $207 million and correspondingly reduced 2020 cash flow
by $207 million, a $414 million swing. This is consistent with the fact that, as shown in the summarised balance sheet
above, trade and other payables were lower at 31 December 2020 than at 31 December 2019 by $108 million despite
the fact that the TPG Corporation acquisition balance sheet contained trade and other payables of $272 million
(i.e. there was an underlying decrease in trade and other payables at 31 December 2020 of $380 million compared
to 31 December 2019).
2. Capital expenditure (capex)
Capex comprises payments for property, plant and equipment and for intangible assets (excluding spectrum
payments). Capex for 2020 of $612 million was $70 million higher than for 2019 due to the six month and four day
contribution from TPG Corporation in 2020. The $612 million capex corresponds closely to the total $648 million of
property, plant and equipment and intangible asset additions (excluding spectrum) in the balance sheet in the year
and primarily represents investment in the Group’s mobile and fixed telecommunications network infrastructure and
business support systems.
3. Mobile spectrum payments
During the year, prior to the merger, the Group made payments totalling $204 million for the acquisition of spectrum
licences, comprising (a) a $132 million contribution to the joint venture between the Company and TPG Corporation
for its 50% share of the 3.6 GHz spectrum acquired by the joint venture at the ACMA’s December 2019 auction, and
(b) a final $72 million instalment in respect of the 700 MHz spectrum acquired at the ACMA’s April 2017 auction.
4. Net cash acquired through merger
This represents the cash held by TPG Corporation at the merger effective date.
5. Disposal of subsidiary (net of cash disposed)
As part of the debt restructuring required to implement the agreed merger debt structure, the Company’s pre-merger
shareholders assumed $4,475 million of the Company’s debt. This was achieved by transferring the Company’s
financing subsidiary to the pre-merger shareholders which included $4,844 million of debt and associated cross
currency swaps. A cash payment of $379 million was made to the pre-merger shareholders in order to achieve the
required level of debt assumption and to repay all associated borrowing costs.
21
6. Cash reclassified within assets held for sale
As noted in the balance sheet commentary above, the Group’s interest in the Tech2 Group Pty Ltd was reclassified as
held for sale as at 31 December 2020. This line item in the cash flow statement reflects the removal of Tech2’s cash
balance from the Group’s consolidated cash balance.
7. Net finance costs paid
Net finance costs paid decreased in 2020 primarily due to the Group’s reduced debt post-merger, coupled with lower
average interest rates in 2020 compared to 2019. This decrease was partially offset by one-off establishment fees
paid in respect of the new Merged Group debt facility entered into in July 2020.
8. Pre-acquisition dividends paid to TPG Corporation shareholders
Between the merger accounting effective date of 26 June 2020 and the merger completion date of 13 July 2020, TPG
Corporation paid a dividend of $479 million to its pre-merger shareholders to increase its debt to the level that had
been agreed that it would bring into the merged Group.
4.4 Segments
Prior to the merger, the Company reported results for a single operating segment. However, prior to the merger, TPG
Corporation reported two operating segments, being its Consumer and Corporate Segments. TPG Corporation’s
Consumer Segment comprised residential and small business customers, and its Corporate Segment comprised
corporate, government and wholesale customers.
Following the merger, the merged Group now also recognises a Consumer and Corporate Segment. The Consumer
Segment comprises the legacy TPG Corporation Consumer Segment plus the consumer customers of the legacy VHA
business, while the Corporate Segment comprises the legacy TPG Corporation Corporate Segment plus the enterprise,
business and wholesale customers of the legacy VHA business.
Merged Group Operating Segments
Consumer Segment
Corporate Segment
Fixed and mobile services to consumers and small business customers.
Fixed and mobile services to business, enterprise, government and wholesale customers.
Results by operating segment are set out below:
CONSUMER
CORPORATE
UNALLOCATED
TOTAL
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
Revenue
Service revenue
Handset revenue
Total revenue
Other income
2,891
815
3,706
–
2,125
1,042
3,167
–
588
56
644
–
Cost of telco services
(1,219)
(619)
(169)
Cost of handsets sold
Employee benefits expense
Other operating expenses
(799)
(258)
(312)
(1,037)
(208)
(268)
(56)
(68)
(43)
281
65
346
–
(76)
(65)
(24)
(29)
EBITDA
1,118
1,035
308
152
–
–
–
11
–
–
(2)
(44)
(35)
–
–
–
10
–
–
–
(19)
(9)
3,479
871
4,350
11
2,406
1,107
3,513
10
(1,388)
(695)
(855)
(328)
(399)
(1,102)
(232)
(316)
1,391
1,178
The increase in revenue and EBITDA for both segments reflects the inclusion of TPG Corporation results for the six
months and four days of 2020 post the merger effective date of 26 June 2020. The 2020 financial results commentary
and investor presentation available on the Company’s website at www.tpgtelecom.com.au/investor-relations set out the
segment results for 2020 and 2019 on a pro forma basis (i.e. as if the merger had been effective since 1 January 2019)
to assist users of the accounts to gain a better understanding of the underlying performance of the segments during
the period.
Annual Report 202022
Operating and Financial Review continued
4.5 Customer numbers
Group mobile subscribers
As at 31 December 2020, the Group had 5.25 million mobile customers, down from 5.99 million as at 31 December 2019.
Postpaid and prepaid mobile customers decreased by 158,000 and 545,000 respectively.
A significant proportion of these declines is attributable to the effect that COVID has had on the number of international
visitors and temporary visa holders in Australia which have historically been an important customer segment for the
Group. However, the declines are also reflective of the competitive intensity of the industry which has seen industry
postpaid average revenue per user (‘ARPU’) decline over the past year. In that regard, our Group’s ARPU decline has
been relatively modest but that relative ARPU discipline has come at the cost of subscriber losses in 2020.
Group broadband subscribers
Being primarily a mobile telecommunications business prior to the merger, the Company had only a relatively small
number of fixed broadband (NBN) customers, 119,000 as at 31 December 2019. TPG Corporation, being a provider
of fixed telecommunications services, brought approximately two million fixed broadband customers into the merged
Group, and the Group finished 2020 with 2.17 million fixed broadband customers.
4.6 Outlook
TPG Telecom heads into 2021 with increased confidence amid continuing uncertainty due to COVID-19, as well as
ongoing NBN headwinds and the introduction of the Regional Broadband Scheme (‘RBS’) levy.
While the merged company is in a stronger position to respond to aggressive competition in the market and mitigate
headwinds, we expect financial performance will continue to be impacted by global travel restrictions, NBN margin
erosion and the new RBS levy.
In 2021, we expect an incremental negative impact of approximately $20 million from the impact of COVID on
international roaming and international visitor revenue. We also expect total NBN headwinds of approximately
$60 million and an $11 million negative impact from the RBS levy for the year.
We plan to offset these headwinds by bringing more customers onto fixed wireless and other on-net services,
continuing to improve performance in mobile, growing Enterprise and Government, and realising around $70 million
in merger synergy cost savings.
We are encouraged by improved momentum in mobile in the final quarter 2020 in response to Vodafone’s Infinite
Data plans, a strong iPhone 12 launch and Vodafone’s 5G TV and digital campaign as the naming rights partner of the
Summer of Cricket.
Building on this, we will continue to drive innovation and improve co-ordination across our brands, maintain our
competitive market positioning, and deliver more compelling multi-service incentives and simpler customer journeys
to grow our converged households.
To help offset the impact of fewer international visitors in the Australian market, we are upweighting our retention
capabilities and strategies towards existing customers, and offering new customers great value propositions across
our family of brands.
With many customers continuing to spend more time at home as a result of COVID and greater flexibility in working
arrangements, we also expect the trend of increased customer take-up of high speed NBN plans will continue.
Despite the ongoing challenges, we are cautiously optimistic about the year ahead and in a stronger underlying
position as we continue to focus on delivering for customers and shareholders now and in the future.
23
Directors’ Report
The Directors present their report, together with the Financial Report of TPG Telecom Limited (formerly named Vodafone
Hutchison Australia Limited) for the financial year ended 31 December 2020 in compliance with the provisions of the
Corporations Act 2001.
Board of Directors
Details of Directors of the Company who held office at any time during or since the end of the previous year are set
out below:
Current
The following are the Directors who held office at 31 December 2020.
David Teoh
Chairman
David Teoh is the founder of the TPG Corporation group of companies, which was merged
with VHA during 2020. He served as Executive Chairman and Chief Executive Officer (CEO) of
TPG Corporation Limited (ASX:TPM) from 2008 until 13 July 2020. Mr Teoh is also a Director of
Tuas Limited.
Mr Teoh’s appointment as Chairman of the merged Company commenced on 13 July 2020.
Special Responsibilities: Chairman of the Board and Member of the Governance Remuneration
and Nomination Committee
Iñaki Berroeta
Managing
Director and Chief
Executive Officer
Iñaki Berroeta joined VHA as Chief Executive Officer in 2014. A 24-year veteran of the
telecommunications industry, Mr Berroeta previously served as CEO of both Vodafone Romania
and Vodafone Malta, and held various operational roles at Vodafone Spain, Global Star USA,
AirTouch International Inc. (USA) and Airtile Moviles (Spain).
Fok Kin Ning,
Canning
Non-Executive
Director
Mr Berroeta holds a Master of Science in Telecommunications from Bilbao Superior School of
Telecommunications Engineering, Spain, and a Master of Business Administration from Henley
Management College, UK.
Mr Berroeta’s appointment to the Board commenced on 29 June 2020.
Special Responsibilities: Managing Director and Chief Executive Officer
Fok Kin Ning, Canning has been a Director of TPG Telecom since 2001. He has been a Director
of Hutchison Telecommunications (Australia) Limited since 1999. Mr Fok has been an Executive
Director and Group Co-Managing Director of CK Hutchison Holdings Limited since 2015. He
has been a Director of Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited since
1985 and 1984 respectively, both of which became wholly-owned subsidiaries of CK Hutchison
Holdings Limited in 2015. He has been Chairman and a Non-Executive Director of Hutchison
Telecommunications Hong Kong Holdings Limited since 2009 and of Hutchison Port Holdings
Management Pte. Limited as the Trustee-Manager of Hutchison Port Holdings Trust since 2011,
an Executive Director since 1985 and Chairman since 2005 of Power Assets Holdings Limited, and
Chairman and an Executive Director of HK Electric Investments Manager Limited as the Trustee-
Manager of HK Electric Investments and of HK Electric Investments Limited since 2013. He has
also been an Executive Director and Deputy Chairman of CK Infrastructure Holdings Limited since
1997 and a Director of Cenovus Energy Inc. since January 2021. He was a Co-Chairman from
2000 to December 2020 and has been a Director since 2000 of Husky Energy Inc. (delisted on
5 January 2021 following its combination with Cenovus Energy Inc.).
He holds a Bachelor of Arts degree and a Diploma in Financial Management, and is a Fellow of
Chartered Accountants Australia and New Zealand.
Special Responsibilities: Mr Fok served as a Member of the Governance Remuneration and
Nomination Committee from 13 July 2020 until 19 August 2020.
Annual Report 202024
Directors’ Report continued
Pierre Klotz
Non-Executive
Director
Pierre Klotz is the Vodafone Group plc (‘Vodafone’) Group Corporate Finance Director. He joined
Vodafone in July 2011 and is responsible for the Vodafone Group’s Mergers & Acquisitions and
Treasury related activities.
Diego Massidda
Non-Executive
Director
Robert Millner
Non-Executive
Director
Dr Helen Nugent
AO
Non-Executive
Director
Previously, Mr Klotz held a number of senior executive positions at UBS Investment Bank and at
HSBC Investment Bank. He holds a Master of Science in Business Administration from Gothenburg
School of Economics and Commercial Law.
Mr Klotz’s appointment to the Board commenced on 12 May 2020.
Special Responsibilities: Member of the Audit and Risk Committee
Diego Massidda is CEO of Vodafone Partner Markets, and a Director of Vodafone Sales
& Services Limited.
Mr Massidda joined Vodafone in 2007 as Group Director of Broadband and Online, and
subsequently he was Group Director of Video and Connected Home. From 2011 to 2016, he
served as CEO of Vodafone Hungary.
Prior to joining Vodafone, Diego was CEO of the ISP Tiscali in South Africa and France, and of
Telecom Italia wireline operations in France. He also spent 6 years with McKinsey & Company
earlier in his career.
He holds a degree in Hydraulic Civil Engineering from the Università di Cagliari, Italy, and a Master
in Business Administration from INSEAD, France.
Mr Massidda’s appointment to the Board commenced on 12 May 2020.
Special Responsibilities: Member of the Governance Remuneration and Nomination Committee
Robert Millner served as a Non-Executive Director of TPG Corporation from 2000 until the merger
with the Company in 2020, and was the Chairman of TPG Corporation from 2000 until 2008.
Mr Millner has over 30 years’ experience as a Company Director and is currently a Director of
the following listed companies: Apex Healthcare Berhad, Brickworks Limited, BKI Investment
Company Limited, Milton Corporation Limited, New Hope Corporation Limited and Washington H.
Soul Pattinson and Company Limited.
Mr Millner was also an interim Director at Hunter Hall Global Value Limited from April 2017 to June
2017 and a Director of Australian Pharmaceutical Industries Limited from May 2000 to July 2020.
Mr Millner is also a Director of Tuas Limited.
Mr Millner’s appointment to the Board commenced on 13 July 2020.
Helen Nugent is the Chairman of Ausgrid and the National Disability Insurance Agency, and a
Non-Executive Director of IAG.
She has been a Company Director for over 20 years, and has over 40 years’ experience in the
financial services sector. This includes having been Chairman of Veda Group, Funds SA, and Swiss
Re (Australia), a Non-Executive Director of Macquarie Group, Director of Strategy at Westpac
Banking Corporation, and a Partner at McKinsey & Company. She has also been Chairman of
Australian Rail Track Corporation and a Non-Executive Director of Origin Energy.
Dr Nugent has given back to the community in education and the arts, having been Chancellor
of Bond University; President of Cranbrook School; Chairman of the National Opera Review;
Chairman of the Major Performing Arts Inquiry; and Deputy Chairman of Opera Australia. She is
currently Chairman of the National Portrait Gallery of Australia.
Dr Nugent is an Officer of the Order of Australia (AO) and received a Centenary Medal as well as
an Honorary Doctorate in Business from the University of Queensland and an Honorary Doctorate
from Bond University. She holds a BA (Honours) and Doctorate of Philosophy from the University
of Queensland and a Master of Business Administration with Distinction from the Harvard
Business School.
Dr Nugent’s appointment to the Board commenced on 13 July 2020.
Special Responsibilities: Chairman of the Governance Remuneration and Nomination Committee
and member of the Audit and Risk Committee
25
Frank Sixt
Non-Executive
Director
Frank John Sixt has been a Director of TPG Telecom Limited since 2001. He has been a Director
and an Alternate Director to a Director of Hutchison Telecommunications (Australia) Limited since
1998 and 2008 respectively. Mr Sixt has been an Executive Director, Group Finance Director and
Deputy Managing Director of CK Hutchison Holdings Limited since 2015. Since 1991, Mr Sixt
has been a Director of Cheung Kong (Holdings) Limited and Hutchison Whampoa Limited, both
of which became wholly-owned subsidiaries of CK Hutchison Holdings Limited in 2015. He has
been Chairman and a Non-Executive Director of TOM Group Limited since 1999 and an Executive
Director of CK Infrastructure Holdings Limited since 1996. He has also been an Alternate Director
to a Director of HK Electric Investments Manager Limited as the Trustee-Manager of HK Electric
Investments and of HK Electric Investments Limited since 2015. He has been a Director of
Cenovus Energy Inc. since January 2021. Mr Sixt has also been a Director of Husky Energy Inc.
(delisted on 5 January 2021 following its combination with Cenovus Energy Inc.) since 2000.
He has almost four decades of legal, global finance and risk management experience, and
possesses deep expertise in overseeing financial reporting system, risk management and internal
control systems as well as sustainability issues and related risks.
Mr Sixt holds a Master’s degree in Arts and a Bachelor’s degree in Civil Law, and is a Member of
the Bar and of the Law Society of the Provinces of Québec and Ontario, Canada.
Special Responsibilities: Member of the Governance Remuneration and Nomination Committee
from 20 August 2020. Member of the Audit and Risk Committee until 12 July 2020.
Arlene Tansey
Non-Executive
Director
Arlene Tansey is currently a Non-Executive Director of Aristocrat Leisure Limited, WiseTech Global
Limited, Infrastructure NSW and Lend Lease Real Estate Investments Limited. She is also a Board
Member of the Australian National Maritime Museum Foundation and Council. She is a former
Non-Executive Director of Adelaide Brighton Limited and Healius Limited.
Ms Tansey is a Member of Chief Executive Women and the International Women’s Forum and a
Fellow of the Australian Institute of Company Directors.
She has a Juris Doctor (Law) from the University of Southern California and an MBA in finance
and international business from New York University.
Ms Tansey has worked in commercial and investment banking in Australia and the US. Her
expertise covers a variety of disciplines including corporate advisory, M&A, commercial banking,
capital management and business turnaround.
Ms Tansey’s appointment to the Board commenced on 13 July 2020.
Special Responsibilities: Chairman of the Audit and Risk Committee and Member of the
Governance Remuneration and Nomination Committee
Shane Teoh
Non-Executive
Director
Mr Teoh has served as a Non-Executive Director of TPG Corporation since 2012. He is Managing
Director of Total Forms Pty Ltd, a leading developer of accounting and taxation software in
Australia.
Mr Teoh holds a Bachelor of Commerce and a Bachelor of Laws from the University of
New South Wales.
Mr Teoh’s appointment to the Board commenced on 13 July 2020.
Annual Report 202026
Directors’ Report continued
Former Directors
The following persons were Directors of the Company until the dates specified below, noting that 26 June 2020 and
13 July 2020 were respectively the effective date and the implementation date of the merger between the Company and
TPG Corporation Limited.
NAME
ROLE
Francesco Bianco
Non-Executive Director
Amanda Harkness
Non-Executive Director
Dominic Lai
Non-Executive Director
Miguel Marin
Non-Executive Director
Barry Roberts-Thomson
Non-Executive Director
Ronald Spithill
Non-Executive Director
Vivek Badrinath
Non-Executive Director
FINAL DATE
AS DIRECTOR
28 June 2020
28 June 2020
28 June 2020
28 June 2020
12 July 2020
28 June 2020
11 May 2020
Thomas Reisten
Non-Executive Director and Member of Audit and Risk Committee
11 May 2020
Kwan Cheung
Alternate Director for Mr Fok
Cliff Woo
Alternate Director for Mr Lai
Company Secretary
28 June 2020
28 June 2020
Mr Tony Moffatt was appointed Company Secretary of the Company on 17 August 2020. Tony holds a Bachelor of Arts
and Laws from the University of New South Wales and is a Member of Law Society of New South Wales.
Mr Trent Czinner was Company Secretary of the Company for the period of the financial year prior to 17 August 2020.
Directors’ shareholdings
The relevant interest of each director in the shares and options over such instruments issued by the companies within the
Group and other related bodies corporate, as notified by the Directors to the Australian Stock Exchange in accordance with
section 205G of the Corporations Act 2001, at the date of this report is disclosed in the Remuneration Report.
Directors’ meetings
Prior to the implementation of the merger between the Company and TPG Corporation Limited (ASX:TPM), there
were three Board meetings and two meetings of the Audit and Risk Committee. Since the implementation date, there
were six meetings of the Board, four meetings of the Audit and Risk Committee and five meetings of the Governance
Remuneration and Nomination Committee.
27
The number of Board and Committee meetings held during the financial year and the number of meetings attended by
each of the Directors as a Member of the Board or relevant Committee were as follows:
BOARD MEETINGS
AUDIT AND RISK
COMMITTEE MEETINGS
GOVERNANCE REMUNERATION
AND NOMINATION
COMMITTEE MEETINGS
DIRECTOR
D Teoh
I Berroeta
C Fok
P Klotz
D Massidda
R Millner
H Nugent
F Sixt
A Tansey
S Teoh
F Bianco
A Harkness
D Lai
M Marin
B Roberts-Thomson
R Spithill
V Badrinath
T Reisten
K Cheung (alternate)
C Woo (alternate)
NOTE:
A
6
6
6
6
7
6
6
9
6
6
0
3
3
3
3
3
1
1
2
–
B
6
6
9
7
7
6
6
9
6
6
3
3
3
3
3
3
2
2
3
–
A
–
–
–
4
–
–
4
2
4
–
–
–
–
–
–
–
–
2
–
–
B
–
–
–
4
–
–
4
2
4
–
–
–
–
–
–
–
–
2
–
–
A
5
–
1
–
5
–
5
2
5
–
–
–
–
–
–
–
–
–
–
–
B
5
–
3
–
5
–
5
2
5
–
–
–
–
–
–
–
–
–
–
–
A: Number of meetings attended by the Director/Alternate Director.
B: Number of meetings held to which the Director was eligible to attend as a Member (or Alternate for a Director where
the Director was not able to attend).
Principal activities
The principal activity of the Group is the provision of telecommunications services.
Significant changes in the state of affairs
The following changes in the state of affairs of the Company occurred during the year:
Merger with TPG Corporation
The merger of the Company and TPG Corporation became effective for accounting purposes on 26 June 2020 and was
legally completed on 13 July 2020. The merger was implemented through a Scheme of Arrangement under which the
Company acquired all of the shares in TPG Corporation in return for issuing shares in the Company to TPG Corporation
shareholders. The Scheme was approved by the Supreme Court of New South Wales on 26 June 2020 and became
effective for accounting purposes on that day, being the deemed date of effective control. The Scheme was implemented
on 13 July 2020 when the agreed number of shares in the Company were issued to TPG Corporation shareholders.
TPG Corporation Limited changed its name from TPG Telecom Limited and was suspended from trading on the ASX
on 29 June 2020, and the Company changed its name to TPG Telecom Limited on 29 June 2020 and listed on the
ASX on 30 June 2020.
Annual Report 202028
Directors’ Report continued
COVID-19
Since the reporting date, containment policies by the Australian Government and governments around the world remain
in force to prevent the spread of COVID-19. The level of restrictions and measures to limit movement into and out of
Australia, and also domestically, continue to evolve. While there is prevailing uncertainty over the extent and duration
of the COVID-19 pandemic, it is reasonably likely that the pandemic will continue to have an impact on the Group’s
operations and results in future periods.
Review of operations
The Operating and Financial Review (‘OFR’) provides details relating to the Company’s operations and results for the
financial year.
Dividends
The Directors have declared a fully franked final 2020 dividend of 7.5 cents per share. The dividend has a record date of
17 March 2021 and will be paid on 14 April 2021.
For information regarding the special dividends declared by TPG Corporation Limited prior to the merger, refer to
Note 12 in the notes to the consolidated financial statements.
There were no other ordinary dividends paid or declared by the Company during or since the current or previous
corresponding periods.
Likely developments
The OFR provides details relating to the Company’s business strategies and prospects for future financial years.
This information in the OFR is provided to assist with informed decision making of shareholders.
Events subsequent to reporting date
Other than the matters described elsewhere, there has been no other matter or circumstance that has arisen after the
reporting date that has significantly affected, or may significantly affect:
(i) the operations of the Company and of the Group in future financial years, or
(ii) the results of those operations in future financial years, or
(iii) the state of affairs of the Company and of the Group in future financial years.
Corporate Governance
The Company’s Corporate Governance Statement details its compliance with the Corporate Governance Principles and
Recommendations (4th edition) published by the ASX Corporate Governance Council. Refer to www.tpgtelecom.com.
au/investor-relations for further details.
Environmental and other sustainability risks
TPG Telecom seeks to comply with all laws and regulations relevant to its operations.
This includes obligations under the National Greenhouse and Energy Reporting Act 2007, which requires the Company
to report its Australian greenhouse gas emissions, energy consumption and energy production on an annual basis to
the Clean Energy Regulator.
During the financial year, there have been no claims against TPG Telecom in respect of a breach of environmental
regulation.
For more information on environmental performance, including environmental regulation, see the TPG Telecom
Sustainability Report 2020, which will be available online at https://www.tpgtelecom.com.au/investor-relations.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237
of the Corporations Act 2001.
29
Employees and OHS
TPG Telecom manages varied levels of inherent risk within its health, safety and wellbeing (HSW) management systems.
These risks are both direct and indirect in nature and are not limited to but include inappropriate behaviour to our
retail staff, structural risk and 5G deployment, employee wellbeing and associated risks within the Company’s facilities,
products and services. The Company adopts a risk based approach to how it actively monitors and manages its
obligations and is aware that any failure to manage these risks could cause harm to its people, partners or members
of the public. Over the past twelve months the Company has faced new challenges in supporting its employees and
customers through the COVID-19 pandemic, the ongoing consolidation of the Company’s safety management systems
with those of TPG Corporation and in the support it provided to communities through the 2019/2020 summer bushfire
season. The Company will continue to evolve its approach to HSW in 2021 as it further embeds its businesses with a
consistent approach to systems, monitoring and compliance.
Indemnification and insurance of officers and directors
Indemnification
The Company has agreed to indemnify all directors of the Company, on a full indemnity basis and to the full extent
permitted by law, against all losses or liabilities (including all reasonable legal costs, charges and expenses) incurred by
the director as a director or officer of the Company or a related body corporate of the Company.
Insurance policies
The Group maintains directors’ and officers’ liability insurance for the benefit of persons defined in the policy which
include current and former directors and officers, including senior executives of the Company and directors, senior
executives and secretaries of its controlled entities to the extent permitted by the Corporations Act 2001. The terms of
the insurance contract prohibit disclosure of the premiums payable and other terms of the policies.
Auditor indemnity
The Company has agreed to reimburse its auditors, PricewaterhouseCoopers, for any liability (including reasonable legal
costs) incurred by PricewaterhouseCoopers with connection with any claim by a third party arising from the Company’s
breach of the audit agreement between the Company and PricewaterhouseCoopers. The reimbursement obligation
is subject to restrictions contained in the Corporations Act 2001 (Cth). No payment has been made to indemnify the
auditors during or since the end of the financial year.
Non-audit services
During the financial year, PricewaterhouseCoopers (‘PwC’), the Company’s auditor, has been engaged to performed
certain other non-audit services in addition to their statutory duties. Details of the amounts paid to PwC for audit and
non-audit services provided during the year are set out in Note 29 of the financial statements.
The Board of Directors, in accordance with advice provided by the Audit and Risk Committee, is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
l all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the
impartiality and objectivity of the auditor, and
l none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration, as required under section 307C of the Corporations Act 2001, is set
out on page 60.
Rounding of amounts
The Company is of a kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016 and, in accordance with that instrument, all financial information presented in the
consolidated financial statements and Directors’ Report has been rounded to the nearest million dollars, unless
otherwise indicated.
Annual Report 202030
Remuneration Report
Executive Summary
This, the first Remuneration Report of TPG Telecom Limited (‘TPG Telecom’, ‘the Company’), reflects both the timing
and nature of the merger between Vodafone Hutchison Australia (VHA) and TPG Corporation, as well as the progressive
transition of the Company’s Executive remuneration to a single approach in a publicly listed environment.
More specifically, this Remuneration Report reflects the following observations:
l Over the past year, TPG Telecom’s remuneration approach supported delivery and initial implementation of the
merger in a way that was consistent with delivering value for shareholders.
l Going forward, changes to the current remuneration system for Executives will support short and longer-term
alignment between employees and shareholders in a publicly listed environment.
l Non-Executive Directors have exercised effective governance and are remunerated in ways that support the retention
of their independence and their commitment to shareholder performance.
The Past Year
For TPG Telecom, 2020 has been a year in two parts: pre and post the merger of 26 June 2020. Reflecting the structure
of the merger, the consequence was that until the merger date, VHA – rather than TPG Corporation – was the reporting
entity. This determined the composition of Executive Key Management Personnel (KMP), as did an organisational
structure change and new fixed remuneration arrangements that took effect on 17 August 2020.
The result is that three former senior VHA executives, including the ongoing CEO Iñaki Berroeta, are classified as KMP
for the full year. Six former VHA executives ceased to be KMP during the course of the year; while three other senior
executives became KMP at or after the organisation restructure on 17 August 2020.
These changes affected fixed remuneration, with new arrangements put in place on 17 August 2020, other than for the
CEO, whose new arrangement took effect from 1 July 2020. The new organisation structure and fixed remuneration
arrangements supported the merger’s implementation, with fixed remuneration benchmarked to the median of ASX
11-50 peer organisations. Thus, disclosed KMP Executive fixed remuneration for 2020 reflects both the period for which
executives were KMP, and the fixed remuneration arrangements that came into effect on 17 August 2020.
Short term incentive (STI) arrangements operated in a different way. This was because the VHA STI Plan was already
in operation from the beginning of 2020, before the Court handed down its decision in relation to the merger and
before it was known that the merger would proceed. VHA’s Scheme, paid in cash following the end of the financial year,
continued to operate. It was based on performance in relation to Service Revenue (40%); Earnings before net financing
costs, tax, depreciation and amortisation (EBITDA) (40%); and Operating Free Cash Flow (FCF) (20%), with a multiplier
for individual performance from 0% to 150% affecting individual outcomes. Post-merger, performance metrics needed to
be adjusted for each of Service Revenue, EBITDA and Operating FCF. In addition, the new TPG Telecom Board approved
the same Scheme operating for former senior TPG Corporation Executives, including incoming Executive KMP, so that
incentives for all Executives were aligned for 2H 2020 during the early stages of the merger.
The STI outcomes for Executives are consistent with the performance of the company over the period. The assessment
of performance comprised three elements. The first element related to the full year company performance metrics and
targets previously approved by the VHA Board. These targets were assessed up to 30 June 2020 and the outcomes were
weighted at 50% for 1H 2020. The second element related to revised financial forecasts approved by the TPG Telecom
Board for the balance of the year. Performance relative to these forecasts was assessed on a quantitative and qualitative
basis and the outcome was weighted at 50% for 2H 2020. The weighted performance outcomes for 1H and 2H were
applied to the STI targets of the former VHA KMP. For former TPG Corporation KMP, 2H performance was applied to
their STI targets. The final performance element was the assessment of individual performance which was then applied
to the business modified STI outcomes to determine the final STI payment.
In addition, the 2020 VHA long term incentive (LTI) Plan continued to operate for former VHA executives who had received
letters of offer for the Scheme in early 2020. This legacy Scheme, which operates over a three year period, has two equally
weighted tranches: one tranche, tested annually, depends on meeting Operating FCF targets; the other tranche is service
based, requiring the Executive to still be employed by the company at the payment date in February after the end of the
third year. Prior to the merger, the then VHA Remuneration Committee also approved the acceleration of the 2018 LTI Plan
and a portion of the 2019 LTI Plan. This is disclosed in remuneration outcomes for former VHA Executive KMP.
31
Going Forward
Going forward, changes to the remuneration approach have been approved to create alignment between employees and
shareholders in a way that is consistent with expectations for an ASX listed company.
That approach links TPG Telecom’s purpose, its strategic priorities, its remuneration principles, and its remuneration
structure.
Fixed remuneration – consistent with the approach adopted for the latter part of 2020—is set by reference to the
median of the external market for comparable roles, taking into consideration the size and complexity of the role, skills
and experience of employees and internal market relativities. The external market data consists of median benchmarks
for comparable roles in ASX 11-50 peer organisations. Fixed remuneration consists of base salary plus superannuation.
No fixed KMP remuneration increases are proposed for 2021.
From 1 January 2021 a new STI approach, aligned to TPG Telecom’s strategic priorities, has also come into operation.
Subject to Group financial and risk gateways, and an individual behavioural gateway, the CEO will be eligible to earn
a STI of up to 100% of base salary at target, and 150% at maximum; while the equivalent for other Executive KMP will
be 65% at target and 100% at maximum of base salary. Performance outcomes will be assessed against a balanced
scorecard incorporating financial and non-financial measures, as well as individual performance achievement aligned to
strategic priorities for the Executive’s specific role. STI will be paid in a mix of cash and Deferred Share Rights (DSRs),
with the percent deferred increasing from 40% to 50% over the next three years, with the progressive increase reflecting
the fact that currently no deferred component exists for any Executive. DSRs will vest in two equal tranches after one
and two years, subject to continuing employment. Malus conditions will apply, and Executives will be unable to enter
into any arrangement that limits their economic exposure to unvested DSRs.
A new LTI Plan also came into operation in 2021. Under this Scheme, the CEO will be eligible for an allocation of
performance share rights valued at 100% of base remuneration at target, and 150% at maximum, with the equivalent
for other Executive KMP being 65% at target and 100% at maximum. Performance will be tested over a three year
period against two equally weighted performance hurdles: namely, Operating FCF, and relative total shareholder return
(TSR) against a nominated peer group of ASX 100 companies that excludes energy, financial, materials and real estate
sectors. The number of performance rights to be issued (reflecting the value allocated) will be determined by the face
value of the volume weighted average share price (VWAP) of a TPG Telecom ordinary share over the five days following
announcement of the annual results and before the grant date. Malus conditions will apply and no arrangements can
be entered into to limit the economic risk of the performance rights. Performance rights will generally be forfeited if
the Executive leaves, except in special circumstances including redundancy, retirement, death or total and permanent
disability.
Total remuneration for Executive KMP has been set so that target total remuneration is at or below the median of the
ASX 11-50 peer group, while maximum remuneration has been set to be close to target total remuneration at the
75th percentile of the ASX 11-50 peer group for a comparable role.
Executive KMP will also need to hold the value equivalent of one year’s base salary in shares or share equivalents,
which can be accumulated over five years from the date of the merger or appointment, whichever is later.
Non-Executive Directors Governance and Remuneration
The timing and nature of the merger has also determined the Directors of the Board of Directors who are designated
as KMP.
As a consequence, two Non-Executive Directors held those roles for the entire year; another eight until various dates
prior to the merger; two assumed office in May just prior to the merger; with another five taking office on 13 July 2020
at the time of merger implementation. Put another way, post merger, the Board consists of nine Non-Executive Directors,
with two being Independent Non-Executive Directors, with the Board being chaired by Mr David Teoh, the previous
CEO and Executive Chairman of TPG Corporation.
Both pre and post-merger, the governance responsibilities of the Non-Executive Directors have been defined and
are exercised in a way that preserves the independence from management. Management of conflicts of interest are
rigorously enforced.
Annual Report 202032
Remuneration Report continued
Non-Executive Directors do not receive fees that are contingent on performance; shares in return for their service;
retirement benefits, other than statutory superannuation; or any termination benefits. The exception was a payment
made to Mr David Teoh as a final termination payment related to 12 weeks severance pay ($371,538) as CEO and
Executive Chairman of TPG Corporation, prior to the merger. This payment was approved by the post-merger Board of
TPG Telecom, based on legal advice, with Mr Teoh not receiving any papers and absenting himself from the meeting.
As disclosed in the Scheme booklet, the Chairman is eligible to receive an annual fee for his service of $450,000 (plus a
fee of $20,000 for being a member of the Governance, Remuneration and Nomination Committee (GRNC)). The Chairman
of the Audit and Risk Committee and the GRNC, both of whom are independent directors, respectively receive fees of
$50,000 and $40,000 a year for those roles; while Non-Executive Directors (other than the Chairman) are eligible to
receive an annual base fee of $165,000. Directors have determined that there will be no increase in directors’ fees in 2021.
Non-Executive Directors who personally receive board fees are required to hold the equivalent of one year of their
base Non-Executive Director fee in shares, which can be accumulated over four years from the date of the merger or
appointment, whichever is later. At any point in time, the value of a Non-Executive Director’s minimum holding will be
calculated as the higher of the purchase price or current market price. Non-Executive Directors are required to advise
the Company Secretary of the purchase price at the time of purchase.
Contents
1. Key Management Personnel
2. Overview
3. 2020 Executive Remuneration Structure
4. 2021 Executive Remuneration Structure
5. 2020 and 2021 Non-executive Director Governance and Remuneration
Appendix 1 – Executive Service Agreements
Appendix 2 – Executive Statutory Remuneration
Appendix 3 – Non-Executive Director Statutory Remuneration
Appendix 4 – Equity Movements
Appendix 5 – Related Party Transactions
33
33
35
35
45
52
56
x
x
x
x
1. Key Management Personnel
1.1 Significant changes have occurred in the composition of the Executive KMP to reflect the structure and
stages of the merger.
KMP are those persons having the authority and responsibility for planning, directing and controlling the activities of TPG
Telecom, directly or indirectly, including any director (whether executive or otherwise). At TPG Telecom, the relevant roles
meeting this criteria have significant influence over the operating activities, and profit and loss of the organisation.
The full list of Executive KMP is reported as follows:
NAME
ROLE
TERM AS KMP1
Iñaki Berroeta
Chief Executive Officer
Daniel Lloyd
Group Executive Wholesale
Ana Bordeianu
Chief Customer Officer Vodafone and Lebara
Full year
Full year
Full year
Ben McIntosh
Chief Commercial Officer
Ceased to be KMP 14 February 2020
Kevin Millroy
Chief Technology Officer
Ceased to be KMP 7 February 2020
Sean Crowley
Chief Financial Officer
Ceased to be KMP 16 August 2020
Trent Czinner
General Counsel and Company Secretary
Ceased to be KMP 16 August 2020
Vanessa Hicks
Director Human Resources
Ceased to be KMP 16 August 2020
Robert James
Chief Information Officer and Director of Business Enablement
Ceased to be KMP 16 August 2020
Stephen Banfield
Group Chief Financial Officer
Commenced 17 August 2020
Craig Levy
Chief Operating Officer TPG, iiNet and Internode
Commenced 17 August 2020
Elizabeth Aris
Group Executive Enterprise & Government
Commenced 1 December 2020
1. If an Executive did not serve as KMP for the full year, all remuneration information disclosed in this report is from the date the Executive commenced as
KMP to the date they ceased as KMP.
Annual Report 2020
34
Remuneration Report continued
Changes in Executive KMP occurred as a result of the following:
1. VHA Executives that remain part of the KMP. These Executives held KMP roles within VHA prior to the merger and have
also been appointed to KMP roles in the organisation following merger implementation. They are highlighted in yellow.
2. VHA Executives who left the organisation prior to the merger or who ceased being KMP on 16 August 2020 in
anticipation of an organisation restructure. They are highlighted in orange.
3. TPG Corporation or new Executives who have been appointed to roles which hold a significant influence over the
operating activities and profit and loss of the organisation; and who are KMP as at 31 December 2020. They are
highlighted in purple.
1.2 Non-Executives, who are KMP, reflect the evolution of the merger.
Non-Executive Directors are classified as KMP, but they are not Executives. The KMP, who were Non-Executive Directors,
changed as the merger progressed.
KMP
Canning Fok
ROLE
FROM DATE
TO DATE1
Non-Executive Director
Chairman
1 January 2020
1 January 2020
31 December 2020
12 July 2020
Frank Sixt
Non-Executive Director
1 January 2020
31 December 2020
Vivek Badrinath
Non-Executive Director
1 January 2020
11 May 2020
Thomas Reisten
Non-Executive Director
1 January 2020
11 May 2020
Francesco Bianco
Non-Executive Director
1 January 2020
28 June 2020
Amanda Harkness
Non-Executive Director
1 January 2020
28 June 2020
Dominic Lai Kai Ming
Non-Executive Director
1 January 2020
28 June 2020
Miguel Angel Marin Pilz
Non-Executive Director
1 January 2020
28 June 2020
Ronald Spithill
Non-Executive Director
1 January 2020
28 June 2020
Barry Roberts-Thomson
Non-Executive Director
1 January 2020
12 July 2020
Diego Massidda
Non-Executive Director
12 May 2020
31 December 2020
Pierre Klotz
David Teoh
Non-Executive Director
12 May 2020
31 December 2020
Non-Executive Director and Chairman
13 July 2020
31 December 2020
Robert Millner
Non-Executive Director
13 July 2020
31 December 2020
Dr Helen Nugent AO
Independent Non-Executive Director
13 July 2020
31 December 2020
Arlene Tansey
Independent Non-Executive Director
13 July 2020
31 December 2020
Shane Teoh
Non-Executive Director
13 July 2020
31 December 2020
1. Directors serving up until 31 December 2020 remain in place.
The Non-Executive Directors listed above fall into four categories:
1. Non-Executive Directors for all of 2020. They are highlighted in yellow.
2. Non-Executive Directors who left the Board at or prior to merger implementation on 13 July 2020. They are
highlighted in orange.
3. Non-Executive Directors who joined the Board in May 2020 prior to implementation and who remain on the Board as
at 31 December 2020. They are highlighted in blue.
4. Non-Executive Directors who joined the Board on the merger implementation date of 13 July 2020, and who were
Directors effective 31 December 2020. They are highlighted in purple.
35
2. Overview
Notwithstanding the significant challenges posed by COVID-19, TPG Telecom’s approach to remuneration up to and
immediately after the merger has been focused on delivering the benefits of the merger for shareholders.
Nonetheless, as indicated in the Scheme Booklet, and as a matter of good corporate governance, TPG Telecom’s Board
of Directors and the Governance, Remuneration and Nomination Committee (GRNC) have examined those remuneration
practices which will serve the merged Company best in a listed environment.
Following this review, the Board has concluded that:
While TPG Telecom’s legacy remuneration system has served it well in 2020, a revised approach will better support
TPG Telecom’s short and longer-term objectives. More specifically:
- Over the past year, TPG Telecom’s Executive remuneration approach supported delivery and initial implementation
of the merger in a way that was consistent with delivering value for shareholders. (See Section 3: 2020 Executive
Remuneration Structure).
- Going forward, enhancements to the remuneration approach for Executives will support short and longer-term
alignment between employees and shareholders in a publicly listed environment. (See Section 4: 2021 Executive
Remuneration Structure).
- Non-Executive Directors have exercised effective remuneration governance and are remunerated in ways that
support the retention of their independence and their commitment to performance for shareholders. (See Section 5:
2020 and 2021 Non-Executive Director Governance and Remuneration).
Each of these conclusions is outlined in the following sections of the report, primarily for KMP, which has also
undergone significant change during the year.
3. 2020 Executive Remuneration Structure
Over the past year, TPG Telecom’s Executive remuneration approach supported delivery and initial implementation of
the merger in a way that was consistent with delivering value for shareholders.
It is widely acknowledged that 2020 was a year like no other. Unprecedented is the word most commonly used to
describe the impact of the COVID-19 global pandemic.
However, along with the challenges posed by the global pandemic, TPG Telecom faced uncertainties associated with the
merger between VHA and TPG Corporation, first announced on 30 August 2018.
It was only on 26 June 2020 that the merger became effective from an accounting perspective, resulting technically
in TPG Corporation being delisted from the ASX; and VHA being listed on the ASX as TPG Telecom. Merger
implementation occurred on 13 July 2020.
Importantly, this means that before 26 June 2020, it is VHA, rather than TPG Corporation, that was the reporting
remuneration entity, with reporting for the merged entity occurring thereafter. An organisation restructure that took
effect on 17 August 2020, has also affected the remuneration for Executive KMP.
The key elements of Executive remuneration – namely fixed, STI and LTI – are described below for 2020.
Annual Report 202036
Remuneration Report continued
3.1 Fixed remuneration for Executive KMP reflects both historic roles and changes subsequently made as
the merger implementation progressed.
Fixed remuneration for the CEO for 2020 reflects remuneration adjustments throughout the year, including the evolution
of the merger, with two changes being made during the year.
First, following VHA’s scheduled 2020 remuneration review, Mr Berroeta’s fixed remuneration - comprised of base
salary, car allowance and superannuation- was increased by 2.8% on 1 March 2020. Second, after a review by the
VHA Remuneration Committee and immediately after the effective date of the merger (26 June 2020), Mr Berroeta’s
fixed remuneration was increased, effective from 1 July 2020, to $1,871,694. This remuneration decision was based
on the increased size and scope of the merged company against the median of the ASX 11-50 peer group. The fixed
remuneration for each period is outlined in the chart below.
2020 CEO Fixed Remuneration
PERIOD
DESCRIPTION
1 Jan 20 – 29 Feb 20
VHA fixed remuneration prior to 2020 VHA
salary review
1 Mar 20 – 30 Jun 20
VHA fixed remuneration following
VHA salary review determined by VHA
Remuneration Committee
1 Jul 20 – 31 Dec 20
TPG Telecom fixed remuneration determined
by VHA Remuneration Committee and
subsequently noted by the GRNC and TPG
Telecom Board
CEO ANNUAL FIXED
REMUNERATION1,2
$
CEO PRO RATA FIXED
REMUNERATION
$
1,471,003
245,167
1,512,253
504,084
1,871,6943
935,847
Total
1,685,098
1. Consists of base salary and statutory superannuation.
2. The CEO’s Fixed Remuneration package prior to 1 July 2020 was inclusive of a car allowance of $37,500. From 1 July 2020 this car allowance was
discontinued and incorporated into the CEO’s base salary.
3. Consists of base salary of $1,850,000 and statutory superannuation of $21,694.
The outcome of these changes is that Mr Berroeta’s fixed remuneration for 2020 was $1,685,098.
Fixed remuneration for other Executive KMP also reflects the evolution of the merger with two changes being made
during 2020.
As with Mr Berroeta, the fixed remuneration of VHA KMP was reviewed in February 2020 by the VHA Remuneration
Committee at that time. Base remuneration adjustments ranged from 0% to 4%, which became effective on
1 March 2020.
Following the merger, on 17 August 2020, a new organisation structure was announced with changes to the Executives
who were KMP as outlined in Section 1. At the same time changes were approved by the GRNC and the Board for
fixed remuneration for ongoing and new KMP. Remuneration for those Executives was set at or below the median for
comparable roles in ASX 11-50 peer organisations.
As a result, fixed remuneration outcomes for Executive KMP reflects not just remuneration changes, but also the period
for which each person was KMP.
37
PRO RATA FIXED
REMUNERATION FOR
PERIOD AS KMP1
$
1,685,0982
63,757
293,585
634,322
572,524
319,957
317,735
322,244
367,001
274,736
81,786
64,323
NAME
ROLE
TERM AS KMP
Iñaki Berroeta
Chief Executive Officer
Full year
Elizabeth Aris
Group Executive Enterprise &
Government
Commenced 1 December 2020
Stephen Banfield
Group Chief Financial Officer
Commenced 17 August 2020
Ana Bordeianu
Chief Customer Officer Vodafone
and Lebara
Full year
Daniel Lloyd
Group Executive Wholesale
Full year
Sean Crowley
Chief Financial Officer
Ceased to be KMP 16 August 2020
Trent Czinner
General Counsel and Company Secretary Ceased to be KMP 16 August 2020
Vanessa Hicks
Director Human Resources
Ceased to be KMP 16 August 2020
Robert James
Craig Levy
Chief Information Officer and Director
of Business Enablement
Chief Operating Officer TPG, iiNet
and Internode
Ceased to be KMP 16 August 2020
Commenced 17 August 2020
Ben McIntosh
Chief Commercial Officer
Ceased to be KMP 14 February 2020
Kevin Millroy
Chief Technology Officer
Ceased to be KMP 7 February 2020
1. Fixed remuneration consists of contractual base salary and statutory superannuation amounts.
2. Inclusive of car allowance from 1 January 2020 to 30 June 2020.
Fixed remuneration for Executives who held those roles as at 31 December 2020 is outlined in the table below.
NAME
ROLE
TERM AS KMP
Iñaki Berroeta
Chief Executive Officer
Full year
Elizabeth Aris
Group Executive Enterprise
& Government
Commenced 1 December 2020
Stephen Banfield
Group Chief Financial Officer
Commenced 17 August 2020
Ana Bordeianu
Chief Customer Officer Vodafone
and Lebara
Full year
Craig Levy
Chief Operating Officer TPG, iiNet
and Internode
Commenced 17 August 2020
Daniel Lloyd
Group Executive Wholesale
Full year
1. Fixed remuneration consists of contractual base salary and statutory superannuation amounts.
ONGOING
ANNUAL FIXED
REMUNERATION
FROM 17 AUGUST1
$
1,871,694
721,694
771,694
721,694
721,694
621,694
Annual Report 202038
Remuneration Report continued
3.2 STI payments reflect VHA’s Scheme, with adjustments made post merger to incorporate new
participants and targets.
The VHA STI Scheme was designed for participants to share in the success of the business and incentivise individual
contributions. It operated throughout 2020 for all former VHA Executives, including KMP.
Further, from 17 August 2020, to ensure the alignment of incentives for former VHA and TPG Corporation Executives
after the new organisation structure was announced, former TPG Corporation Executives were included in the VHA
Scheme. More specifically, this applied to Stephen Banfield and Craig Levy.
The 2020 VHA STI Scheme operated as follows:
PLAN ELEMENT
OUR APPROACH
STI opportunity
Under the VHA STI scheme, the CEO is eligible to earn STI equivalent to 70% of base salary
at target and 105% of base salary at maximum for the period 1 January 2020 to 30 June
2020. From 1 July 2020 when the CEO’s TPG Telecom contract came into effect, the CEO is
eligible to earn STI equivalent up to 100% of base salary at target.
Other Executive KMP are eligible to earn STI equivalent of 60% of base salary at target and
90% of base salary at maximum.
Performance measures
The STI for 2020 is based on a combination of individual and business performance over
the financial year. STI outcomes are determined using the following formula:
Individual target
STI ($)
X
Business
performance
multiplier
X
Individual
performance
multiplier
=
STI payment
Business performance multiplier
Business performance is assessed against a scorecard of measures selected based on
organisation business priorities. The measures included in the business performance
multiplier for 2020 are outlined below and apply to all eligible Executives. The outcomes
were weighted at 50%, given that it related to half of the year.
PERFORMANCE MEASURE
WEIGHTING
Service revenue
EBITDA
Operating FCF
40%
40%
20%
The business performance multiplier can exceed 100% based on performance against the
scorecard of measures.
Individual performance multiplier
The individual performance multiplier recognises the individual contribution of each
Executive to business outcomes. The individual multiplier can range from 0% to 150%.
39
PLAN ELEMENT
OUR APPROACH
How performance is
evaluated
The GRNC makes a recommendation to the TPG Telecom Board on the CEO’s individual
performance. This performance is modified against Company performance measures to
determine the final outcome.
The CEO makes a recommendation to the GRNC for recommendation to the TPG Telecom
Board on the individual performance of each Executive KMP. This performance is modified
against Company performance measures to determine the final outcome.
STI outcomes for the CEO or other Executive KMP are subject to overriding Board discretion.
Performance period
STI is assessed over a one-year period aligned to the TPG Telecom financial year.
For Executives who commence eligibility through the performance period, performance
will be considered from their start date in the plan.
Instrument
STI awards are paid in cash following the end of the financial year as per the existing
VHA scheme. For the component of the CEO’s remuneration post 1 July 2020, 60% is paid
in cash and 40% will be paid in DSRs which will vest equally in two tranches after a one
and two year vesting period.
Cessation of
employment
STI will generally be forfeited if an Executive KMP resigns before the payment date, except
in special circumstances (including redundancy, retirement, death or total and permanent
disability or as otherwise agreed).
Where business performance is yet to be determined for the period, outcomes will reflect
target performance. Where business performance has been determined this will be applied
to final outcomes together with individual performance.
In the absence of knowing whether the merger would proceed, full year company performance metrics and targets
were approved by the VHA Board for the entire year. Progress against these metrics, as at the end of June 2020, has
been assessed. The outcomes were weighted at 50% for 1H 2020. Subsequently, revised financial forecasts were used
by the TPG Telecom Board on a quantitative basis to make decisions in relation to the balance of the year, along with
a qualitative overlay.
More specifically, the table below details the 2020 STI Target and eligibility for Executive KMP. The STI target has been
determined in one of three ways:
1. For Mr Berroeta, the total 2020 STI Target was a combination of the 1H 2020 and 2H 2020 target amounts.
The 1H 2020 target was pro-rated based on the CEO’s former VHA contract with the target STI set at 70% of base
salary as at 1 March 2020. The 2H 2020 target was based on Mr Berroeta’s new TPG Telecom contract effective
1 July 2020, with the STI Target set at 100% of base salary as at 1 July 2020. The 2H 2020 STI will be paid in cash
60% and DSRs 40% (subject to shareholder approval at the AGM). DSRs vest in equal tranches over two years.
2. For current KMP who were formerly VHA Executives (Daniel Lloyd and Ana Bordeianu), the STI Target is 60% of
base salary as at 1 March 2020.
3. For current Executive KMP formerly from TPG Corporation (Stephen Banfield and Craig Levy), a nominal pro rata
STI Target was determined by the GRNC and the Board for the period 17 August 2020 to 31 December 2020.
Annual Report 202040
Remuneration Report continued
EXECUTIVE KMP
Iñaki Berroeta
Elizabeth Aris
Stephen Banfield
Ana Bordeianu
Daniel Lloyd
Craig Levy
2020 STI
ELIGIBLE PERIOD
Full year
Ineligible for 2020 STI
From 17 August 2020
Full year
Full year
From 17 August 2020
2020 STI TARGET
$
1,423,033
–
89,583
348,000
314,630
108,333
No STI payments were made to former KMP for 2020 during the period they were KMP.
3.3 Prior to the merger, VHA accelerated 2018 and 2019 LTI payments while maintaining the 2020
LTI Scheme as originally intended.
The VHA LTI Plan is focussed on the retention of Executive talent and the alignment of remuneration with Company
performance over the long term. Only the VHA Scheme operated in 2020 and it was only in place for former VHA KMP.
It is described below.
PLAN ELEMENT
OUR APPROACH
LTI opportunity
Under the VHA Scheme, the CEO is eligible to earn the LTI equivalent of 80% of his base
salary ($1,375,000 as at the time of allocation, February 2020) at target and 90% of base
salary at maximum.
Other Executive KMP are eligible to earn LTI equivalent to 70% of base salary at target and
79% of base salary at maximum.
Performance measures
Performance will be tested annually against two equally weighted independent tranches.
One tranche is subject to Operating FCF performance and the other tranche is service
based.
Performance period
LTI is assessed annually over the three year period (for instance out to the end of 2022 for
the 2020 LTI allocation).
How performance
is evaluated
For LTI tranches subject to an annual Operating FCF performance target:
l A threshold of 80% achievement of the annual Operating FCF target is required in
order for 75% of the tranche to vest. Performance below this level will result in the
performance tranche lapsing.
l It is a straight-line vesting whereby 100% achievement of the Operating FCF target
results in 100% of the annual tranche vesting.
l Performance at or above 110% of the Operating FCF target will result in a cap of 125% of
the annual tranche vesting.
LTI, subject to a service condition, will vest at 100% if an Executive KMP is still employed by
the Company and has not resigned before the payment date.
Any payment under the LTI is subject to GRNC and Board approval.
Instrument
LTI awards will be paid subject to performance assessment and service conditions in cash
after the financial year results, which for the 2020 LTI Plan will be in February 2023.
Cessation of employment LTI will be forfeited if an Executive KMP resigns before the payment date. LTI will be
pro-rated at the discretion of the GRNC in special circumstances including redundancy,
retirement, death or total and permanent disability.
Change of control
Participation in the LTI will cease on a Change of Control. A pro rata determination may be
made for any LTI award by the Board in its absolute discretion.
41
LTI Plans that were outstanding at the time of merger are detailed below.
LTI GRANT
2018 LTI
2019 LTI
2020 LTI
PERFORMANCE PERIOD START DATE
PERFORMANCE PERIOD END DATE
1 January 18
1 January 19
1 January 20
31 December 20
31 December 21
31 December 22
In addition, the 2017 LTI Plan whose performance period ended on 31 December 2019, was paid out in February 2020.
Prior to the merger implementation, the VHA Remuneration Committee approved the level of business performance in
relation to the 2018 and 2019 VHA LTI Plans as well as the first half of the 2020 LTI Plan.
The VHA Remuneration Committee also decided to accelerate the 2018 LTI Plan in full for the remaining period to
31 December 2020. The 2019 LTI Plan was also accelerated for the completed period up to 30 June 2020.
The table below details the performance outcomes for 2018 and 2019.
LTI GRANT
2018 LTI
2019 LTI
PERFORMANCE YEAR 1
PERFORMANCE YEAR 2
PERFORMANCE YEAR 3
125%
122.5%
122.5%
125%1
125%
100%2
1. First half 2020 performance applied to 50% of the 2019 LTI Year 2 tranche. The remaining 50% of the 2019 LTI Year 2 tranche is payable in FY22.
2. Performance Year 3 of the 2019 LTI grant has been approved by the VHA Remuneration Committee prior to merger at 100% of target.
As a result, the following LTI payments to the Executive KMP listed below who were considered KMP at the time the
payment, were made in February 2020 in the case of the 2017 LTI Plan and in July 2020 for the 2018 and 2019 LTI Plans.
NAME
Iñaki Berroeta
Ana Bordeianu
Sean Crowley
Trent Czinner
Vanessa Hicks
Daniel Lloyd
2017
LTI PAYMENT
$
2018
LTI PAYMENT1
$
2019 LTI PAYMENT
(TO 30 JUNE 2020)1
$
1,025,787
1,056,560
–
98,091
285,588
104,530
372,746
353,063
101,034
333,448
360,908
383,929
557,895
175,875
156,333
171,087
179,783
195,075
TOTAL
LTI PAYMENT
$
2,640,242
528,938
355,458
790,123
645,221
951,750
1. Lapsed LTI awards for Ben McIntosh of $397,185 and Kevin Millroy of $364,292 were equal to 29% of their on-foot 2018 LTI award and 63% of their
on-foot 2019 LTI award.
In addition, an LTI Scheme was put in place at the beginning of 2020 for former VHA KMP which will vest (subject
to performance hurdles) in 2022 and be paid in February 2023. The VHA Remuneration Committee prior to merger
implementation determined the performance outcome for 1H 2020 with a subsequent recommendation and decision
being made by the GRNC and the TPG Telecom Board in relation to 2H 2020 performance.
Annual Report 202042
Remuneration Report continued
The LTI allocation for 2020 for former VHA Executives who were KMP as at 31 December 2020 is as follows:
EXECUTIVE KMP
VHA BASE SALARY1
2020 LTI TARGET % OF
VHA BASE SALARY
2020
LTI ALLOCATION
Iñaki Berroeta
Ana Bordeianu
Daniel Lloyd
1,375,000
525,000
514,101
80%
70%
70%
1,100,000
367,500
359,871
1. VHA Base Salary (excluding superannuation) as at time of allocation, February 2020.
The remaining portion of the 2019 LTI Plan and the 2020 LTI Plan are currently outstanding and will be paid out in
February 2022 and 2023 respectively, subject to meeting performance targets.
3.4 Total remuneration for 2020 reflects pre and post merger fixed remuneration, STI and LTI
arrangements, as well as other LTI payments.
For former VHA KMP for the period they were KMP, total actual remuneration paid for 2020 reflects Fixed remuneration
in relation to historic roles as KMP of VHA, along with STI payments for 2020, and accelerated payments for the 2018
and 2019 LTI Plans. For former TPG Corporation and new Executives, payments reflect Fixed Remuneration from
17 August 2020, along with STI payments since the same date.
As noted earlier, in the absence of knowing whether the merger would proceed, STI targets, business performance
multiplier metrics and performance targets were set by the VHA Remuneration Committee for the entire year. Progress
against these metrics, for the period 1 January 2020 to 30 June 2020, was assessed by the TPG Telecom Board and
the outcomes weighted at 50% for 1H 2020. The 1H 2020 outcomes on the performance metrics are detailed in the
following table.
1H 2020 BUSINESS SCORECARD MEASURE
SCORECARD WEIGHTING
PERFORMANCE OUTCOME
Service revenue
EBITDA
Operating FCF
Total
40%
40%
20%
100%
37.6%
37.3%
26.5%
101.4%
For the 2H 2020 business performance measure, revised financial forecasts were used by the GRNC and the TPG
Telecom Board on a quantitative and qualitative basis to make decisions in relation to the balance of the year. Following
an assessment of quantitative performance data relative to these revised financial forecasts and qualitative data related
to important financial, customer, operational and integration achievements throughout the year, the Board approved the
2H 2020 business performance measure outcome at 100%.
A further assessment of individual performance was completed for the CEO by the Board. The Board also assessed the
individual performance for other Executive KMP with input from the CEO. An individual performance multiplier of 100%
was approved for each KMP.
43
The table below applies the above performance outcomes to the 2020 STI targets to calculate the actual 2020 STI
payment for Executives who were KMP as at 31 December 2020.
BUSINESS PERFORMANCE MULTIPLIER
EXECUTIVE
KMP
Iñaki Berroeta2
Elizabeth Aris3
Stephen Banfield4
Ana Bordeianu5
Craig Levy4
Daniel Lloyd5
1H 2020
2H 2020
OVERALL1
101.4%
–
–
101.4%
–
101.4%
100%
–
100%
100%
100%
100%
100.7%
–
100%
100.7%
100%
100.7%
INDIVIDUAL
PERFORMANCE
MULTIPLIER
2020 STI
TARGET
$
2020 STI
ACTUAL
$
100%
1,423,003
1,429,935
–
100%
100%
100%
100%
–
89,583
348,000
108,333
314,630
–
89,583
350,423
108,333
316,820
1. Overall Business Performance Multiplier has been calculated based on the pro-rated performance of 1H and 2H.
2. The CEO’s 2020 STI Target is pro-rated based on the approved pre-merger VHA remuneration package effective from 1 January to 30 June 2020 and
the approved TPG Telecom remuneration package effective from 1 July 2020 to 31 December 2020.
3. Elizabeth Aris commenced on 1 December 2020 and is therefore not eligible for a 2020 STI payment.
4. STI Targets for former TPG Corporate Executive KMP have been pro-rated from 17 August 2020 to 31 December 2020.
5. STI Targets for former VHA Executive KMP have been applied for the full financial year based on the STI Targets set and approved in February 2020.
The below table details actual remuneration awarded to Executives (both in cash and deferred) for 2020 for Executives
who were KMP as at 31 December 2020.
SHORT TERM INCENTIVE
ACTUAL AWARDED
FIXED
REMUNERATION1
$
RETENTION
$
CASH
$
DEFERRED
$
TOTAL
REMUNERATION
$
LTI9
$
1,685,098
92,5002
1,057,9134
372,0228
1,100,000
4,307,533
63,757
293,585
634,322
274,736
572,524
–
–
–
–
77,1153
–5
89,5836
350,4237
108,3336
316,8217
–
–
–
–
–
–
–
367,500
–
359,871
63,757
383,168
1,352,245
383,069
1,326,331
EXECUTIVE KMP
Iñaki Berroeta
Elizabeth Aris
Stephen Banfield
Ana Bordeianu
Craig Levy
Daniel Lloyd
1. Fixed remuneration values represent the pro-rated contract value of the KMP’s fixed remuneration package over the period they served as KMP.
2. Relates to the CEO’s contractually approved Retention payment of $555,000 which is to be paid in 6 equal tranches on specified payment dates
between 1 October 2020 and 1 January 2022, subject to continuous employment, unless the Company terminates CEO’s employment without
cause. The payment is not to be taken into account when calculating any payment for STI, LTI, annual leave, long service leave or on termination
of employment.
3. Relates to two installments, out of a total of three installments, of a contractually approved Retention payment. The second and third installments were
payable in 2020.
4. The CEO’s actual STI Cash is pro-rated based on the approved pre-merger VHA remuneration package effective from 1 January 2020 to 30 June 2020
and the approved TPG Telecom remuneration package effective from 1 July 2020 to 31 December 2020.
5. Elizabeth Aris commenced on 1 December 2020 and is therefore not eligible for a 2020 STI payment.
6. Actual STI for former TPG Corporate Executive KMP has been pro-rated from 17 August 2020 to 31 December 2020.
7. Actual STI for former VHA Executive KMP reflects the full financial year, and is based on the STI Targets set and approved in February 2020.
8. The deferred STI component is based on 40% of the CEO’s pro-rated actual STI from 1 July 2020 to 31 December 2020. The total pro-rated actual STI
is based on the CEO’s Base Salary pro-rated from 1 July 2020 to 31 December 2020.
9. In February 2020 an LTI allocation was approved for previous Executives of VHA. These allocations have not been paid, and are subject to all existing
conditions and performance targets for the 2020 LTI Plan Allocation detailed in 3.3.
Annual Report 202044
Remuneration Report continued
The below table details Actual cash remuneration received by Executives who held those roles as at 31 December 2020.
ACTUAL CASH
FIXED
REMUNERATION1
$
RETENTION
$
SHORT TERM
INCENTIVE
ACTUAL
$
LTI ACTUAL7
$
TOTAL
REMUNERATION
$
1,685,098
92,5002
1,057,9134
2,640,242
63,757
293,585
634,322
274,736
572,524
–
–
–
–
77,1153
–
89,5836
350,4235
108,3336
316,8215
–
–
528,938
–
951,750
5,475,753
63,757
383,168
1,513,683
383,069
1,918,210
EXECUTIVE KMP
Iñaki Berroeta
Elizabeth Aris
Stephen Banfield
Ana Bordeianu
Craig Levy
Daniel Lloyd
1. Fixed remuneration values represent the pro-rated contract value of the KMP’s fixed remuneration package over the period they served as KMP.
2. Represents the first tranche of the CEO’s contracted retention payment.
3. Represents the last two installments out of a total of three installments of the contracted retention payment, with the last payment made in 2020.
4. Actual STI outcome for CEO was calculated based on full year performance. In addition, the CEO was allocated $372,022 in DSRs which will vest
equally in two tranches after a one and two year vesting period.
5. Actual STI outcomes for former VHA Executives were calculated based on full year performance.
6. Actual STI outcomes for former TPG Corporate Executives were calculated based on performance from 1 July 2020.
7. Actual LTI payments include the vested 2017 LTI plan outcome, plus accelerated LTI payments from the 2018 and 2019 LTI plans.
3.5 These remuneration outcomes are aligned with the interests of shareholders.
This section of the Remuneration Report provides an overview of how the Company’s performance for FY20 has driven
remuneration outcomes for our Executive KMP.
TPG Telecom’s remuneration framework has been designed to align the contribution of Executive KMP to the collective
performance of TPG Telecom and shareholder returns.
The below table details the history of Company performance.
FINANCIAL1
Service revenue2
EBITDA3
Operating FCF4
Dividend Paid
Share Price5
Return on Capital
2016
$m
2,363
913
408
2017
$m
2,437
972
495
2018
$m
2,391
1,102
564
2019
$m
2,271
1,178
568
1H 2020
$m
2H 2020
$m
1,097
2,198
531
(61)
860
422
N/A
7.22
N/A
FULL YEAR
2020
$m
3,295
1,391
361
N/A
7.22
N/A
1. Historic performance from 2016 to 2019 relates to TPG Telecom (then VHA) and not to the merged entity. 1H2020 includes 4 days of financial
performance relating to TPG Corporation. Service revenue and EBITDA are derived from statutory financial statements.
2. Service revenue is customer mobile, fixed broadband, data and internet service revenue and excludes other service revenue.
3. EBITDA is defined as earnings before net financing costs, tax, depreciation and amortisation.
4. Operating FCF is based on management reported figures. Operating FCF excludes Spectrum.
5. Represents the closing share price as at 31 December 2020. The closing share price represents a -14.96% movement since the $8.49 opening
share price.
45
4. 2021 Executive Remuneration Structure
Going forward, enhancements to the remuneration approach for Executives will support short and longer-term
alignment between employees and shareholders in a publicly listed environment.
TPG Telecom’s Executive remuneration approach for 2020 supported delivery and initial implementation of the merger.
From 2021 onwards, enhancements to the remuneration approach for Executives will support short and longer-term
alignment between employees and shareholders in a publicly listed environment.
To build meaningful relationships and support vibrant, connected communities
Our purpose
Bring more of
our products
into even more
Australian
households
Launch 5G fixed
wireless services
and bring more
customers onto
our infrastructure
Our strategic priorities
Increase focus
on Enterprise,
Government and
Wholesale
Continue rolling
out 5G network
to reach scale in
major cities
Support our
purpose
Our remuneration principles
Generate
superior returns
to shareholders
over both
the short and
longer term
Deliver great
value and service
for customers
today and
tomorrow
Invest in fast,
reliable and
innovative
technology that
creates value for
customers and
shareholders
Transform
IT & Digital
to enhance
and simplify
the customer
experience
Complete
organisational
integration and
deliver merger
synergies
Incentivise high
performance
while managing
risk
Promote an
organisational
culture aligned
to community
expectations
Our remuneration structure
Remuneration element
2020 approach
Changes for 2021
Fixed remuneration
Benchmarked at the median of the
ASX 11-50 peer group
Benchmarked at the median of the
ASX 11-50 peer group.
Short-term incentive (STI)
Annual performance assessment
of Group financial and individual
performance. Paid in cash.
No fixed remuneration increases are anticipated
for 2021.
Align annual performance assessment of
Group financial, non-financial and individual
performance. Delivered in cash and share rights
deferred over one and two years.
Long term incentive (LTI)
Assessed over a three-year period
based on Operating FCF and
ongoing service. Paid in cash.
Assessed over a three year period based on
Group financial performance and a market
performance hurdle. Granted in share
performance rights and subject to hurdles.
Remuneration principles and decisions under the framework are carefully considered by the Board. The Board may from
time to time apply discretion so remuneration outcomes appropriately reflect outcomes for shareholders and customers.
Remuneration governance
Annual Report 202046
Remuneration Report continued
4.1 The reward approach
During 2020, TPG Telecom reviewed Executive remuneration arrangements considering the organisation’s purpose,
strategic priorities and remuneration principles. The objective was to better support short and longer-term alignment
between employees and shareholders in the merged Company in a publicly listed environment. This is reflected in the
2021 Executive KMP remuneration framework in fixed remuneration, STI and LTI.
Jan 2021
Jan 2022
Jan 2023
Jan 2024
Fixed
Remuneration
Perfomance period (1 year)
Salary paid during the year
Perfomance period (1 year)
Short Term
Incentive
60% paid in cash
40% deferred into
share rights (DSRs)
50% vests after 1 year
50% vests after 2 years
Long Term
Incentive
Perfomance period (3 years)
Perfomance Rights vest subject to performance hurdles being met
Financial Year 1
Financial Year 2
Financial Year 3
Financial Year 4
4.2 Remuneration Mix for 2021
The target remuneration mix has been structured to align CEO and Other Executive KMP with the short and
long-term business objectives of TPG Telecom. For the CEO and Other Executive KMP the graphs below outline the
target remuneration mix between total fixed remuneration (TFR), short term incentive cash and equity components
and long term incentive.
CEO
Other Executive KMP
13%
11%
17%
20%
33%
43%
33%
TFR
LTI
STI Cash
STI Equity
28%
TFR
LTI
STI Cash
STI Equity
47
4.3 Total Target and Maximum Remuneration for 2021
Total Target remuneration for the CEO and other Executive KMP has been set by reference to the median of benchmark
data for comparable roles in ASX 11-50 peer organisations. The maximum has been set at the 75th percentile of
total target remuneration for comparable roles in ASX 11-50 peer organisations. The below table details Total Target
remuneration by reward elements for those Executive KMP who held that role as at 1 January 2021.
EXECUTIVE
KMP
BASE
SALARY1
$
STI TARGET
% OF BASE
SALARY
STI
TARGET
$
% STI
DEFERRED
LTI TARGET
% OF BASE
SALARY
LTI
TARGET
$
TOTAL
TARGET
REMUNER-
ATION
$
Iñaki Berroeta
1,850,000
100%
1,850,000
Elizabeth Aris
Stephen
Banfield
Ana
Bordeianu
Craig Levy
Daniel Lloyd
700,000
750,000
65%
65%
455,000
487,500
700,000
65%
455,000
700,000
600,000
65%
65%
455,000
390,000
1. Statutory superannuation is not included in the calculation of incentives.
40%
40%
40%
40%
40%
40%
100%
1,850,000
5,550,000
65%
65%
455,000
1,610,000
487,500
1,725,000
65%
455,000
1,610,000
65%
65%
455,000
1,610,000
390,000
1,380,000
The below table details Total Maximum remuneration by reward element for those Executive KMP who held that role as at
1 January 2021.
EXECUTIVE
KMP
BASE
SALARY1
$
STI
MAXIMUM
% OF BASE
SALARY
Iñaki Berroeta
1,850,000
700,000
700,000
150%
100%
100%
STI
MAXIMUM
$
2,775,000
700,000
700,000
750,000
100%
750,000
700,000
600,000
100%
100%
700,000
600,000
Elizabeth Aris
Ana
Bordeianu
Stephen
Banfield
Craig Levy
Daniel Lloyd
% STI
DEFERRED
LTI
MAXIMUM
% OF BASE
SALARY
LTI
MAXIMUM
$
TOTAL
MAXIMUM
REMUNER-
ATION
$
40%
40%
40%
40%
40%
40%
150%
100%
100%
2,775,000
7,400,000
700,000
2,100,000
700,000
2,100,000
100%
750,000
2,250,000
100%
100%
700,000
2,100,000
600,000
1,800,000
1. Statutory superannuation is not included in the calculation of incentives.
The sections below provide greater detail in relation to each remuneration element.
4.4 Fixed remuneration 2021
Fixed remuneration is determined by reference to the median of the external market for comparable roles, taking into
consideration the size and complexity of the role, skills and experience of employees and internal market relativities.
The external market data consists of median benchmarks for comparable roles in ASX 11-50 peer organisations. Fixed
remuneration is comprised of base salary plus superannuation. No fixed remuneration increases are proposed for 2021
for Executive KMP.
Annual Report 202048
Remuneration Report continued
4.5 Short Term Incentive 2021
The STI is awarded for annual Company and individual performance and the achievement of TPG Telecom’s strategic
priorities. It aligns the interests of KMP and shareholders.
The key elements of STI for TPG Telecom for 2021 are as follows:
ELEMENT
Gateway
DESCRIPTION
An STI allocation to Executives will be paid after the following considerations are taken
into account:
Assessed at a Group level:
l Financial: minimum financial performance aligned with shareholder interests has
been achieved. This is set at the beginning of the performance year at the discretion
of the Board.
l Risk: appropriate management of financial, operational and reputational risks in the
generation of returns as assessed by the Board in its discretion at the end of the
financial year.
Assessed at an individual level:
l Behaviours: demonstrated behaviours that are aligned with the organisation’s purpose
and culture as assessed by the Board on the advice of management at the end of the
financial year.
STI opportunity
The CEO is eligible to earn STI equivalent of up to 100% of base salary at target and up to
150% of base salary at maximum. Other Executive KMP are eligible to earn STI equivalent
of up to 65% of base salary at target and up to 100% of base salary at maximum.
The target STI opportunity has been set relative to the aggregate STI and LTI remuneration
against the total target remuneration levels at the median of the ASX 11-50 peer
group. The maximum STI opportunity has been determined by reference to total target
remuneration levels at the 75th percentile of the ASX 11-50 peer group.
Funding
The size of the STI pool will be determined based on the specific outcomes of the STI
scorecard measures, capped by the maximum available to individual Executive KMP.
Performance measures
Performance STI outcomes will be assessed against a balanced scorecard developed to
support the Company’s strategic priorities. The table below outlines the performance
measures to be used in 2021.
PERFORMANCE MEASURE
SCORECARD WEIGHTING
Total Service Revenue
Operating FCF
EBITDA (unadjusted)1
Customer experience
Employee experience
Individual performance achievement
TOTAL
15%
15%
20%
10%
10%
30%
100%
Individual performance measures are role specific and set with reference to the
organisation’s strategic priorities as they relate to an individual’s role.
1. The Board reserves the right to use its discretion to adjust abnormal items.
49
ELEMENT
DESCRIPTION
How performance is
evaluated
The GRNC makes a recommendation to the Board on the CEO’s performance against the
Group’s scorecard and individual goals agreed at the beginning of the financial year.
The CEO makes a recommendation to the GRNC for recommendations to the Board on
the performance of each individual Other Executive KMP against the Group’s scorecard
and their individual goals.
Any STI outcomes for the CEO or Other Executive KMP will be subject to overriding
Board discretion.
Instruments
STI will be awarded in cash and DSRs. DSRs are rights over TPG Telecom ordinary
shares. DSRs are granted at no cost to Executive KMP and no dividend is payable for any
unexercised DSRs.
A transition to the desired 50% equity deferral will occur over time given that historically
neither legacy VHA nor TPG Corporation used deferred STI arrangements. The transition
is being staged to balance the retention of Executive KMP over the crucial post-merger
period with shareholder expectations over the near term for the proportion to be retained.
The table below outlines the percentage of cash and deferred equity to be allocated for
STI for the next three years. This applies to all Executive KMP.
YEAR
2021
2022
2023 onwards
CASH COMPONENT
DSR COMPONENT
60%
55%
50%
40%
45%
50%
Performance period
STI is assessed over a one year period, aligned to the calendar year (and TPG Telecom’s
financial year).
Vesting period
The cash component of the STI will be paid following the end of the financial year.
DSRs will vest equally in two tranches after a one and two year vesting period subject to
continued employment.
Number of DSRs issued
The number of DSRs issued is calculated based on the face value of the volume weighted
average share price (VWAP) of TPG Telecom’s ordinary shares over the five days following
the announcement of annual results.
Exercise
Exercise of DSRs is automatic on vesting and there is no exercise price.
Hedging of DSRs
Executives cannot enter into any arrangements that will limit the economic risk of
unvested DSRs.
Malus conditions
In cases where an Executive KMP acts fraudulently or dishonestly or is in breach of his or
her obligations to TPG Telecom, any eligibility to STI or unvested rights will lapse.
Annual Report 202050
Remuneration Report continued
ELEMENT
DESCRIPTION
Cessation of
employment
STI will be forfeited if an Executive KMP resigns before the payment date.
Unvested DSRs will also be forfeited if the Executive KMP resigns before the vesting date.
In special circumstances (including redundancy, retirement, death or total and permanent
disability or as otherwise agreed), the below treatment may apply:
l Cash STI may be awarded pro rata on termination. Where business performance is yet
to be determined for the period, outcomes will reflect at Target performance. Where
business performance has been determined, this will be applied to final outcomes
together with an assessment of individual performance.
l DSRs may be retained on cessation of employment subject to the existing terms and
conditions of the award.
Change of control
DSRs will be subject to the existing terms and conditions of the award and the exercise of
Board discretion.
4.6 Long Term Incentive 2021
LTI supports longer-term alignment between an Executive KMP and the return experienced by shareholders in TPG
Telecom. LTI considers both Company performance and performance relative to the external market.
ELEMENT
DESCRIPTION
LTI opportunity
The target LTI opportunity has been determined by reference to the median of the ASX
11-50 peer group for comparable roles, taking into account the level of fixed, STI and LTI
remuneration. The maximum LTI opportunity has been determined with reference to total
target remuneration levels at the 75th percentile of the peer group.
The CEO is eligible to earn LTI equivalent of up to 100% of base salary at target and up to
150% of base salary at maximum.
Other Executive KMP are eligible to earn LTI equivalent of up to 65% of base salary at target
and up to 100% of base salary at maximum.
Performance measures
and vesting period
Performance under the LTI will be tested against two equally weighted measures linked to:
l Operating FCF after lease payments and excluding spectrum payments; and
l Total Shareholder Return (TSR) relative to a peer group of 48 ASX 100 listed
organisations (excluding Energy, Financials, Materials, and Real Estate sectors).
Performance under the LTI will be tested over a discrete three year period, as outlined in
the table below.
PERFORMANCE MEASURE
Relative TSR
Operating FCF
WEIGHTING
50%
50%
If the performance hurdles are met, vesting may only occur at the end of the three year
performance period.
51
ELEMENT
DESCRIPTION
How performance
is evaluated
Vesting schedules for the LTI performance measures are included in the table below.
Relative TSR vesting schedule
RELATIVE TSR PERFORMANCE
Following the 3 year Performance Period %
ranking with peer group
VESTING
% of Granted Performance Rights
that vest
Equal to or less than the 50th percentile
Between the 50.1 percentile and
75th percentile
Equal to the 75th percentile or above
Operating FCF vesting schedule
OPERATING FCF PERFORMANCE
Performance Period % of 3 Year
Cumulative Target
Less than 80% of the cumulative Operating FCF
target is achieved
80% of the cumulative Operating FCF target
is achieved
Between 80% and 110% of the cumulative
Operating FCF target is achieved
110% or more of the cumulative Operating FCF
target is achieved
0%
Straight–line pro rata vesting
between 50% and 100%
100%
VESTING
% of Granted Performance Rights
that vest
0%
50%
Straight–line pro rata vesting
between 50% and 100%
100%
Instrument
LTI is granted in performance rights that entitle participants to a fully paid ordinary share
in TPG Telecom subject to the meeting of performance hurdles. Performance rights are
granted at no cost. No dividend is payable on unexercised rights.
Number of rights issued
The number of performance rights issued is calculated based on the face value of the
VWAP of TPG Telecom’s ordinary shares over the five days following the announcement of
the Company’s annual results.
Exercise
Hedging
Exercise of performance rights is automatic on vesting and there is no exercise price.
Executives cannot enter into any arrangements that limit the economic risk of unvested
performance rights.
Malus conditions
In cases where an Executive KMP acts fraudulently or dishonestly or is in breach of his or
her obligations to TPG Telecom, any unvested rights will lapse.
Cessation of
employment
Performance rights will generally be forfeited if an Executive KMP resigns before the
vesting date. In special circumstances (including redundancy, retirement, death or total
and permanent disability or as otherwise agreed), any unvested rights may be retained on
cessation of employment subject to the existing terms and conditions of the award and
Board discretion.
Change of control
Performance Rights will be subject to the existing terms and conditions of the award and
Board discretion.
Annual Report 202052
Remuneration Report continued
To further align the interests of the Executive with shareholders, going forward a minimum shareholding requirement has
been approved by the Board for all Executive KMP.
Under the minimum shareholding requirement, Executive KMP are required to acquire and maintain, directly or indirectly,
a holding with a value equivalent of one year’s base salary. Each Executive KMP may accumulate this value over five
years from the date of the merger or appointment, whichever is later. The shareholding requirements will be periodically
reviewed. At any point in time, the value of an Executive KMP’s Minimum Holding will be calculated as the higher of the
purchase price or current market price. The minimum shareholding is calculated as the total value of shares held by the
Executive KMP and unvested performance rights. For the purpose of the calculation, the value of unvested performance
rights is discounted by 50%.
In addition, the Board of TPG Telecom has adopted a share trading policy to ensure Executives comply with, and are
perceived as complying with insider trading laws, and their dealing in securities of TPG Telecom. The policy relates
to no or restricted dealing of securities in relation to trading windows, written acknowledgement for trading, no
short-term speculative trading, disclosure of changes in notifiable interests and margin lending. A breach of policy
will be regarded seriously and may constitute a breach of the law potentially leading to disciplinary action being taken
against the Executive.
5. 2020 and 2021 Non-executive Director Governance and Remuneration
5.1 Governance responsibilities have been clearly defined.
Pre-merger
Prior to the merger, the VHA Remuneration Committee had oversight of VHA’s remuneration arrangements and was
accountable for both CEO and Executive KMP remuneration, as well as the related policies and processes.
The governance responsibilities were performed by the Remuneration Committee at this time which reported to the
full Board.
Prior to the merger, the VHA Remuneration Committee had responsibility for; oversight of remuneration policies for
the company, remuneration arrangements and outcomes for the CEO and Executives; and design and outcomes for all
employee incentive plans. The Remuneration Committee exercised its delegated authority from the Board with respect
to employee incentive plans and ensured practices and procedures complied with legal requirements and were in line
with current market practices.
Post-merger
Following the merger in July 2020, the full Board of Directors of TPG Telecom has had oversight of TPG Telecom’s
remuneration arrangements, and is accountable for both Executive and Non-Executive Director remuneration as well as
the related policies and processes.
The GRNC reports to the full Board either through formal minutes or a verbal report provided to the Board by the
Chairman of the GRNC.
53
Following the merger, the responsibilities of the Board and the GRNC, as defined in the Board and GRNC Charter, are
as follows:
AREA
Executive
remuneration
APPROVED BY BOARD ON
RECOMMENDATION OF GRNC
l Remuneration policies
l Remuneration arrangements for CEO and
Executives and the Company Secretary
l Performance and remuneration outcomes
for the CEO and Executives (including
annual or ad-hoc reviews)
l Design and outcomes for all employee
incentive plans involving equity in the
company
l Gender outcomes to avoid gender or
other bias
l Minimum shareholding policy
Non-Executive
Director
remuneration
l Remuneration policies
l Remuneration fees
(subject to the aggregate cap)
l Minimum shareholding policy
ROLE OF GRNC
In addition to making recommendations to the Board,
the GRNC undertakes the following:
l Reviews remuneration policies to ensure they
reflect:
– risks involved
– time demands
– relevant industry and related benchmarks
l Assesses conformance with minimum
shareholding requirements
l Exercises delegated discretions under employee
incentive and equity plans
l Monitors the effectiveness of employee incentive
and equity plans
l Ensures practices and procedures comply with
legal and ASX requirements and are in line with
current market practices
l Reviews remuneration reporting to ensure it
complies with legal requirements
l Monitors conformance with minimum shareholding
requirement
l Monitors conformance with minimum shareholding
requirement
5.2 The relevant Board Committee is composed of Non-Executive Directors, who operated independently
of management.
The composition of the Committee with oversight of remuneration has changed during the year to reflect the merger.
Pre-merger
Prior to merger, the VHA Remuneration Committee consisted of four VHA Non-Executive Directors, with equal
representation from the two shareholders at that time. All Committee members had a comprehensive understanding of
the pre-merge Company and the interaction of remuneration, risk and performance.
NAME
ROLE
DATE
Canning Fok
Non-Executive Director and Remuneration Committee Chairman
To 12 July 2020
Dominic Lai Kai Ming
Non-Executive Director
Francesco Bianco
Non-Executive Director
Vivek Badrinath
Non-Executive Director
Diego Massidda
Non-Executive Director
To 28 June 2020
To 28 June 2020
To 11 May 2020
From 12 May 2020
to 12 July 2020
Annual Report 202054
Remuneration Report continued
Post-merger
Since the merger, the GRNC has consisted of five Non-Executive Directors, two of whom, including the Committee
Chairman, are independent Non-Executive Directors. All Committee members are diligent in ensuring they have a
comprehensive understanding of the merged company and the interaction of remuneration, risk and performance.
NAME
ROLE
DATE
Dr Helen Nugent AO
Independent Non-Executive Director and GRNC Chairman
From 13 July 2020
Arlene Tansey
Independent Non-Executive Director and Audit & Risk
Committee Chairman
From 13 July 2020
David Teoh
Non-Executive Director and Board Chairman
From 13 July 2020
Diego Massidda
Non-Executive Director
Canning Fok
Non-Executive Director
Frank Sixt
Non-Executive Director
From 13 July 2020
From 13 July 2020
to 19 August 2020
From 20 August 2020
All members of the GRNC have experience in both Human Resources and risk to achieve effective governance of TPG
Telecom’s remuneration system. In addition, all members of the GRNC have extensive experience in remuneration either
through their professional background or as members of the committees of other boards, both in Australia and overseas.
5.3 Effective remuneration governance processes are in operation.
Since the merger, the GRNC has met five times. Director’s attendance at the meetings are set out in the Directors’
Report. Over that period, the GRNC has paid sustained attention to the design and operation of remuneration policies
and practices, at the same time as being acutely aware of the need to motivate and retain employees as the organisation
structure evolves and merger integration proceeds.
More specifically, the GRNC and the Board have strong processes in place for making remuneration decisions for senior
employees, including KMP, which also involves assiduous management of conflicts of interest. These are rigidly followed
both by the GRNC and the Board.
The GRNC also discusses with the CEO the performance of each member of the senior management team, including
the KMP.
5.4 The Board reached its own decision on benchmark information.
In the lead up to, and subsequent to the merger, benchmark data was sought from an independent third party on peer
group remuneration practices and levels as well as on the LTI peer group. This data was considered in detail by the
VHA Remuneration Committee and subsequently by the GRNC as input to its recommendations and decision-making.
However, no recommendation, as defined by the Corporations Act 2001 (Cth) was sought from the third party.
55
5.5 The structure of Non-Executive Director remuneration fees are linked to their governance role and they
are not paid in shares.
TPG Telecom’s remuneration approach ensures that Non-Executive Directors are appropriately remunerated in a way
that supports the retention of their independence.
Prior to the merger, all Non-Executive Directors received no remuneration from VHA and were remunerated directly by
shareholders.
The fees to be paid to Non-Executive Directors of the merged Company were determined prior to the merger and
disclosed in the Scheme Booklet.
Non-Executive Directors do not receive:
l Fees that are contingent on performance;
l Shares in return for their service;
l Retirement benefits, other than statutory superannuation; or
l Termination benefits.
On completion of the merger, David Teoh ceased his position as CEO and Executive Chairman of TPG Corporation and
his employment was ended. External Legal advice was sought in relation to the treatment of David Teoh’s termination
with reference to his contract of employment, and as such his termination from TPG Corporation was treated as a
redundancy. David Teoh’s termination payment included 12 weeks of severance pay in line with the minimum statutory
entitlement. He also received payment for leave entitlements all of which had been previously accrued. He agreed to
waive the 3 month notice period entitlement detailed in his employment contract. This payment was approved by the
post-merger Board of TPG Telecom, based on legal advice, with Mr Teoh not receiving any papers and absenting himself
from the meeting.
David Teoh’s final termination payment is detailed below:
PAYMENT
Annual Leave and Long Service Leave
Severance (12 weeks)
Total termination payment
The CEO is not remunerated separately for acting as a Director.
5.6 The fees paid to Non-Executive Directors are appropriate.
AMOUNT
$
2,265,146
371,538
2,636,684
The maximum aggregate fee pool available for Non-Executive Directors is $2.5 million as set out in the 2020 Scheme
Booklet. Non-Executive Director fees were determined with reference to the median of a peer group of ASX 11-50
companies.
The table below outlines the fees (inclusive of superannuation) paid to Independent Non-Executive Directors.
ROLE
Chair
Member
BOARD
$
450,0001
165,000
AUDIT AND
RISK COMMITTEE
$
GOVERNANCE, REMUNERATION
AND NOMINATION COMMITTEE
$
50,000
25,000
40,000
20,000
1. The Non-Executive Chairman is also paid $20,000 per annum for being a member of the GRNC.
Following a review in late 2020, there are no proposed changes to Non-Executive Director fees for the 2021 financial year.
A Non-Executive Director nominated by a shareholder may elect to have director’s fees paid to their nominating
shareholder. For current Non-Executive Directors this includes Canning Fok, Frank Sixt, Pierre Klotz and Diego Massidda.
Annual Report 202056
Remuneration Report continued
5.7 Non-Executive Directors are required to hold a minimum shareholding of TPG Telecom shares.
To align the interests of the Board with shareholders, the Board has a minimum shareholding requirement for Non-
Executive Directors.
Under the minimum shareholding requirement, Non-Executive Directors are required to acquire and maintain, directly
or indirectly, a holding with a value equivalent of one year of base Non-Executive fees (excluding Committee fees).
Each Non-Executive Director may accumulate this value over four years from the date of the merger or appointment,
whichever is later. The shareholding requirements will be periodically reviewed. This requirement will not apply to any
Non-Executive Director appointed by a nominating shareholder who does not personally receive Non-Executive Director
fees from the Company. At any point in time, the value of a Non-Executive Director’s minimum holding will be calculated
as the higher of the purchase price or current market price. Non-Executive Directors are required to advise the Company
Secretary of the purchase price at the time of purchase.
In addition, the Board of TPG Telecom has adopted a share trading policy to ensure Non-Executive Directors comply
with, and are perceived as complying with, the law as regards to insider trading, and their dealing in securities of TPG
Telecom. The policy relates to dealing in securities during trading windows, written acknowledgement of trading, no
short-term speculative trading, disclosure of changes in notifiable interests and margin lending. A breach of policy is
regarded seriously and may constitute a breach of the law and may lead to disciplinary action being taken against the
Non-Executive Director.
Appendices
1. Executive Service Agreements
The table below sets out the main terms and conditions of the employment contracts of Executive KMP.
Employee notice period
Six months if within the first two years
from start date, 12 months thereafter
6 months
CEO IÑAKI BERROETA
OTHER EXECUTIVE KMP
TPG Telecom notice period
12 months
Term of Agreement
Remuneration Review
Unlimited term
Annual
Restraint and non-solicitation period
12 months
6 months
Unlimited term
Annual
6 months
Termination arrangements
Entitled to severance of 6 months’
base salary
Entitled to severance of 3 months’
base salary or statutory entitlement
whichever is greater
The table below sets out the CEO’s remuneration package from 1 July 2020.
BASE
SALARY
$
SUPER-
ANNUATION
$
TOTAL
FIXED
REMUNER-
ATION
$
RETENTION
PAYMENT1
$
STI
TARGET %
OF BASE
SALARY
STI
MAXIMUM
% OF BASE
SALARY
LTI
TARGET %
OF BASE
SALARY
LTI
MAXIMUM
% OF BASE
SALARY
1,850,000
21,694
1,871,694
555,000
Up to 100%
Up to 150%
Up to 100%
Up to 150%
CEO
Iñaki
Berroeta
1. The Retention payment is to be paid in 6 equal tranches on specified payment dates between 1 October 2020 and 1 January 2022, subject to
continuous employment, unless the Company terminates CEO’s employment without cause. The payment is not to be taken into account when
calculating any payment for STI, LTI, annual leave, long service leave or on termination of employment.
57
2. Executive Statutory Remuneration
Detail of remuneration for Executives is set out below in accordance with statutory disclosure requirements under the
Corporations Act and the Australian Accounting Standards.
Stephen Banfield
202010
282,738
89,583
NAME
Iñaki Berroeta
Elizabeth Aris
YEAR
20207
20209
Ana Bordeianu
Daniel Lloyd
Sean Crowley
Trent Czinner
Vanessa Hicks
Robert James
Craig Levy
Ben McIntosh
Kevin Millroy
Total
20207
20207
202011
202011
202011
202011
202010
202012
202013
1,756,2508
1,471,131
18,040
113,593
58,333
–
612,474
335,681
628,291
359,265
327,782
169,094
325,011
220,734
305,819
169,698
351,551
206,384
263,889
108,333
76,915
59,871
(19,198)
(17,546)
1,264
5,587
20,463
14,927
–
9,340
10,969
9,340
5,587
1,835
–
5,532
26,870
36,108
42,225
12,272
18,950
4,279
17,166
25,079
2,559
5,616
21,348
5,424
10,847
21,848
21,348
15,925
15,925
16,425
15,450
10,847
4,871
4,452
1. Cash salary and fees includes base salary, retention payments and car allowance.
2. STI Cash includes actual STI amounts relating to the 2020 STI Plan performance year, and adjustment to the accruals for the 2019 STI Plan after the
final payment.
3. Non monetary benefits include car parking, medical checks, insurances related to health, salary continuance, death and TPD and tax support (inclusive
of any relevant fringe benefits tax).
4. Other short term benefits relate to accrued annual leave.
5. Termination benefits include payments related to the contractual notice period and severance provisions.
6. LTI Cash includes the accrued or paid amounts during the year relating to the 2020 performance year for the 2018, 2019 and 2020 VHA LTI Plan
Awards, and adjustments to the accruals of the 2018 and 2019 LTI Plan Awards and the final payment of the 2017 LTI Plan Award during the year for
the finalisation of the 2019 performance year outcome.
7. Represents remuneration received as KMP from 1 January 2020 to 31 December 2020.
8. The CEO’s Cash salary and fees includes a cash salary amount of $1,626,250, car allowance of $37,500 and a retention payment of $92,500.
9. Represents remuneration received as KMP from 1 December 2020.
10. Represents remuneration received as KMP from 17 August 2020.
11. Represents remuneration received as KMP up until 16 August 2020.
12. Represents remuneration received as KMP up until 14 February 2020.
13. Represents remuneration received as KMP up until 7 February 2020.
SHORT TERM BENEFITS
POST EMPLOYMENT
BENEFITS
TERMINATION
BENEFITS
LONG TERM BENEFITS
EQUITY BASED PAYMENTS
CASH
SALARY AND
FEES1
$
STI CASH2
$
NON-
MONETARY
BENEFITS3
$
OTHER
SHORT TERM
BENEFITS4
$
SUPERANNUATION
$
TERMINATION
BENEFITS5
LTI CASH6
LONG
SERVICE
LEAVE
EQUITY
SETTLED
EQUITY
SETTLED
STI
$
LTI
$
PERFORMANCE
RELATED
TOTAL
REMUNERATION
$
–
–
–
–
–
–
–
–
–
–
496,991
497,490
1,107,980
77,111
382,877
25,778
$
–
–
364,875
159,305
210,338
221,651
90,333
–
11,961
8,353
$
–
–
4,655
7,962
6,932
7,613
–
4,345
1,683
975
–
–
–
–
–
–
–
–
–
–
–
–
–
$
4,565,453
70,553
420,280
1,391,449
1,474,711
692,340
807,230
736,454
690,224
418,080
577,617
559,211
–
–
–
–
–
–
–
–
–
–
–
–
–
%
56%
0%
21%
50%
50%
47%
53%
53%
43%
26%
(1%)
(2%)
–
5,048,924
3,093,159
97,352
310,249
164,710
994,481
2,557,673
137,054
12,403,602
Annual Report 202058
Remuneration Report continued
3. Non-Executive Director Statutory Remuneration
Detail of remuneration for Non-Executive Directors is set out below in accordance with statutory disclosure
requirements under the Corporations Act and the Australian Accounting Standards.
SHORT TERM BENEFITS
CASH SALARY
AND FEES
$
NON-
MONETARY
BENEFITS
$
210,530
85,478
95,150
92,801
70,975
98,935
90,724
101,085
70,975
916,653
–
–
–
–
–
–
–
–
–
–
POST-
EMPLOYMENT
BENEFITS
SUPER-
ANNUATION
$
TERMINATION
BENEFITS2
$
TOTAL
$
10,847
371,538
592,915
–
–
–
6,743
9,399
–
9,603
6,743
–
–
–
–
–
–
–
–
85,478
95,150
92,801
77,718
108,334
90,724
110,688
77,718
43,335
371,538
1,331,526
NAME1
David Teoh
Canning Fok
Pierre Klotz
Diego Massidda
Robert Millner
Dr Helen Nugent AO
Frank Sixt
Arlene Tansey
Shane Teoh
Total
YEAR
2020
2020
2020
2020
2020
2020
2020
2020
2020
1. The following Non-Executive Directors of VHA resigned during the financial year: V Badrinath, T Reisten, F Bianco, A Harkness, D Lai Kai Ming, M Angel
Marin Pilz, R Spithill and B Roberts-Thomson. These Directors did not receive remuneration from VHA and were remunerated directly by shareholders.
2. Termination benefits for David Teoh reflects a 12 week severance payment made on termination from his role as CEO and Executive Chairman of
TPG Corporation.
4. Equity Movements
The table below provides movements in equity for KMP during the financial year.
HOLDING AT
START OF YEAR
GRANTED AS
REMUNERATION
OTHER
MOVEMENTS1
PURCHASED/
(SOLD)
NAME
David Teoh
Canning Fok
Pierre Klotz
Diego Massidda
Robert Millner
Dr Helen Nugent AO
Frank Sixt
Arlene Tansey
Shane Teoh
Elizabeth Aris
Stephen Banfield
Iñaki Berroeta
Ana Bordeianu
Craig Levy
Daniel Lloyd
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
318,315,608
–
–
–
8,373,058
–
–
–
133,258
–
338,300
–
–
–
–
–
–
–
11,000
–
20,000
–
–
–
–
–
BALANCE AT
YEAR END
318,315,608
–
–
–
8,373,058
11,000
–
20,000
133,258
–
338,300
–
–
437,600
(120,000)
317,600
–
–
–
1. TPG shares issued through a one-for-one exchange for TPM securities on ASX listing.
59
5. Related Party Transactions
Since the completion of the merger, the Group has rented office premises from companies related to a Director of the
Company, David Teoh. The total rent charged for the period was $855,181.
On 13 July 2020, as part of the merger transaction, TPG Corporation paid two dividends to its pre-merger shareholders
comprising:
a. a cash dividend of $0.516 per TPG Corporation share; and
b. an in-specie distribution of shares in Tuas Limited (of one Tuas Limited share for every two TPG Corporation shares).
Each Tuas Limited share was valued at $0.6799 being the five-day VWAP of the Tuas Limited shares for the first five
days of trading following its listing.
Certain KMP of the Company, being David Teoh, Robert Millner, Shane Teoh, Craig Levy and Stephen Banfield, were
pre-merger shareholders of TPG Corporation and were, therefore, recipients of these dividends. The total value of these
dividends paid to the Company’s KMP was $280.4 million.
No loans were made to any KMP.
This concludes the Remuneration Report, which has been audited as required by section 308(3C) of the Corporations
Act 2001 (Cth).
This Directors’ Report is made in accordance with a resolution of the Directors on 25 February 2021.
David Teoh
Director
25 February 2021
Sydney, Australia
Iñaki Berroeta
Director
25 February 2021
Sydney, Australia
Annual Report 2020
60
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of TPG Telecom Limited (formerly named Vodafone Hutchison Australia
Limited) for the year ended 31 December 2020, I declare that to the best of my knowledge and belief,
there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of TPG Telecom Limited (formerly named Vodafone Hutchison Australia
Limited) and the entities it controlled during the period.
S Prakash
Partner
PricewaterhouseCoopers
Sydney
25 February 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Financial Report
About this report
The financial report covers the group consisting of TPG
Telecom Limited (formerly named Vodafone Hutchison
Australia Limited) (‘TPG Telecom’, ‘the Company’) and
its controlled entities (the ‘Group’). Vodafone Hutchison
Australia Pty Limited (‘VHA’) converted to a public
company on 19 June 2020 and changed its name to
Vodafone Hutchison Australia Limited. On 29 June
2020, the Company changed its name from Vodafone
Hutchison Australia Limited to TPG Telecom Limited.
Contents
Financial Statements
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
61
62
63
64
65
66
All amounts are presented in Australian dollars unless
stated otherwise.
Notes to the Consolidated Financial Statements
Note 1. Reporting entity
67
TPG Telecom is a company limited by shares,
incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 1, 177 Pacific Highway
North Sydney NSW 2060
A description of the nature of the Group’s operations
and its principal activities is included in the Directors’
report on pages 22 to 59.
The financial report was authorised for issue by the
Directors on 25 February 2021. The Company has
the power to amend and reissue the financial report.
Note 2. Basis of preparation
Note 3. Segment reporting
Note 4. Revenue from contracts with customers
Note 5. Other profit and loss items
Note 6. Income tax
Note 7. Earnings per share
Note 8. Cash and cash equivalents
Note 9. Trade and other receivables
Note 10. Inventories
Note 11. Derivative financial instruments
Note 12. Business combinations
Note 13. Interests in other entities
Note 14. Property, plant and equipment
Note 15. Right-of-use assets and lease liabilities
Note 16. Intangible assets
Note 17. Trade and other payables
Note 18. Borrowings
Note 19. Provisions
Note 20. Other liabilities
Note 21. Contributed equity
Note 22. Reserves
Note 23. Dividends
Note 24. Related party transactions
Note 25. Commitments
Note 26. Parent entity financial information
Note 27. Deed of cross guarantee
Note 28. Financial risk management
Note 29. Auditor’s remuneration
Note 30. Events occurring after the reporting period
Directors’ Declaration
Independent Auditor’s Report
ASX additional information
67
70
71
73
74
78
78
81
83
83
85
88
92
94
97
102
103
104
105
106
107
107
108
110
111
113
115
121
121
122
123
132
Full-Year Financial Results for the year ended 31 December 2020Financial Statements
62
Consolidated Income Statement
for the year ended 31 December 2020
Revenue from contracts with customers
Other income
Cost of provision of telecommunication services
Cost of handsets sold
Employee benefits expense
Other operating expenses
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Results from operating activities
Finance income
Finance expenses
Net financing costs
Loss before income tax
Income tax benefit/(expense)
Profit/(loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per share for profit/(loss) attributable to owners of the Company
Basic and diluted earnings per share
NOTES
4
5
5
5
5
5
5
6
7
2020
$m
4,350
11
(1,388)
(855)
(328)
(399)
2019
$m
3,513
10
(695)
(1,102)
(232)
(316)
1,391
1,178
(1,188)
(1,021)
203
3
(292)
(289)
(86)
820
734
741
(7)
734
cps
64
157
7
(444)
(437)
(280)
–
(280)
(280)
–
(280)
cps
(68)
The above consolidated income statement should be read in conjunction with the accompanying notes.
63
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020
Profit/(loss) for the year
Other comprehensive income
Items that may subsequently be reclassified to the income statement, net of tax:
Net gain/(loss) on cash flow hedges taken to equity
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
Attributable to:
Owners of the Company
Non-controlling interests
2020
$m
734
2019
$m
(280)
2
2
(1)
(1)
736
(281)
743
(7)
736
(281)
–
(281)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Full-Year Financial Results for the year ended 31 December 202064
Consolidated Statement of Financial Position
as at 31 December 2020
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Prepayments
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Prepayments
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Provisions
Derivative financial instruments
Other current liabilities
Total current liabilities
Non-current liabilities
Contract liabilities
Borrowings
Lease liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
EQUITY
Contributed equity
Reserves
Accumulated losses
Equity attributable to owners of the Company
Non-controlling interests
Total equity/(deficiency in equity)
NOTES
2020
$m
2019
$m
8
9
10
11
13
9
14
15
16
6
17
4
18
15
19
11
20
4
18
15
19
20
21
22
12
120
431
51
–
79
2
734
391
103
130
64
–
683
1,422
110
3,258
1,012
13,469
264
28
18,141
18,824
927
271
–
92
84
1
81
77
1,865
1,454
3,929
–
–
7,325
8,747
1,035
122
5,255
84
37
1
95
1,456
6,629
25
4,330
1,051
64
6
5,476
6,932
11,892
18,399
1
(6,508)
11,892
–
–
1,743
1,544
22
12
3,321
9,950
(1,203)
6,047
(1)
(7,249)
(1,203)
–
11,892
(1,203)
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
65
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Full-Year Financial Results for the year ended 31 December 2020
66
Consolidated Statement of Cash Flows
for the year ended 31 December 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other revenue
Income taxes paid
NOTES
2020
$m
2019
$m
4,822
(3,645)
1,177
11
–
3,914
(2,628)
1,286
10
–
5
6
Net cash generated from operating activities
8(b)
1,188
1,296
Cash flows from investing activities
Net cash acquired as a result of merger
Payments for property, plant and equipment
Payments for spectrum on behalf of joint venture
Payments for intangible assets
Disposal of subsidiary (net of cash disposed)
Cash reclassified to assets held for sale
Transaction costs relating to merger
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of principal element of leases
Finance costs paid
Interest received
Pre-acquisition dividends paid to TPG Corporation shareholders
Net cash outflows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
12
13
13
12
8
99
(411)
(132)
(273)
(379)
(7)
(37)
(1,140)
4,780
(4,594)
(130)
(241)
2
(479)
(662)
(614)
734
120
–
(315)
–
(303)
–
–
(17)
(635)
–
(171)
(112)
(294)
7
–
(570)
91
643
734
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
67
Notes to the Consolidated Financial Statements
Note 1. Reporting entity
TPG Telecom Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered
office is Level 1, 177 Pacific Highway, North Sydney NSW 2060. The consolidated financial statements as at, and for the
year ended 31 December 2020 (referred to throughout this report as ‘2020’), comprise the accounts of the Company
and its subsidiaries (together referred to as the ‘Group’). The Group is a for-profit entity and is primarily involved in the
provision of telecommunications services.
Note 2. Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. For the
purposes of preparing the financial statements, the Company is a for-profit entity.
The consolidated financial statements of the Group also comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements are presented without the parent entity financial statements. Disclosures in relation
to the parent entity required under paragraph 295(3)(a) of the Corporations Act 2001 have been included in Note 26.
The financial statements are prepared in accordance with the historical cost convention, except for unsold handset
and accessory receivables, derivative financial instruments and assets held for sale, which, as noted, are at fair value.
Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.
Comparative figures have been adjusted to conform to the presentation of the financial statements and notes for the
current financial year, where required, to enhance comparability.
(a) Merger with TPG Corporation Limited (formerly named TPG Telecom Limited)
The merger of the Company and TPG Corporation became effective for accounting purposes on 26 June 2020 (being
the acquisition date) and was completed on 13 July 2020.
The merger was implemented through a Scheme of Arrangement under which the Company acquired all of the shares in
TPG Corporation in return for issuing shares in the Company to TPG Corporation shareholders.
The Group’s Consolidated Income Statement for the year to 31 December 2020 includes six months and four days of
results from TPG Corporation (between the accounting effective date and 31 December 2020).
Further details of the merger accounting are set out in Note 12.
(b) Net current asset deficiency
At 31 December 2020, the Group had a deficiency of net current assets of $773 million (2019: a deficiency of $5,207
million). The Group is satisfied that it will be able to meet all its obligations as they fall due, due to its history of
generating positive operating cash flows, its expected future profitability as a merged Group, and existing cash reserves
and available debt facilities.
(c) Principles of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company (its subsidiaries). Subsidiaries are all entities over which the Company has control. The Company controls
an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity.
The acquisition method of accounting is used to account for business combinations by the Group. Subsidiaries are fully
consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that
control ceases.
Full-Year Financial Results for the year ended 31 December 202068
Notes to the Consolidated Financial Statements continued
Note 2. Basis of preparation continued
All intercompany transactions, balances and unrealised gains on transactions between companies within the Group
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Income
Statement, Consolidated Statement of Comprehensive Income and Consolidated Balance Sheet respectively.
(d) Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the
primary economic environment in which the entity operates (the ‘functional currency’). The consolidated financial
statements are presented in Australian dollars, which is the Company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the Consolidated Income Statement except when they relate to financial instruments qualifying for hedges
as set out in Note 11.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates
the fair value was determined.
Foreign operations
The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date.
The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the
transactions. Foreign currency differences are recognised in other comprehensive income and presented in the foreign
currency translation reserve in equity.
(e) Goods and Services Tax (‘GST’)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Consolidated
Statement of Financial Position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from
investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
(f) Rounding of amounts
The Group is of a kind referred to in the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
dated 24 March 2016, and in accordance with that instrument, all financial information presented in the consolidated
financial statements and Directors’ report has been rounded to the nearest million dollars, unless otherwise indicated.
(g) New accounting standards and Interpretations
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period. The Group did not have to
change its accounting policies or make retrospective adjustments as a result of adopting these standards.
69
AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions - AASB 16
Leases has been amended to provide a practical expedient that permits lessees not to assess whether rent concessions
that occur as a direct consequence of the COVID-19 pandemic and meet specified conditions are lease modifications.
Instead, a lessee would not treat those rent concessions as lease modifications. AASB 2020-4 applies to annual periods
beginning on or after 1 June 2020. While the Group has decided to early adopt this amendment, the adoption did not
have a material impact on the Group during the year, due to the immaterial nature of rent concessions received by the
Group during the year.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December
2020 reporting periods and have not been early adopted by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
(h) Key accounting estimates and judgements
Summary of key accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates, which, by definition, will seldom equal
the actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Information about significant areas of estimation uncertainties and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in the financial statements is provided in the following
notes:
l Note 6
l Note 9
l Note 9
Recognition of deferred tax assets
Loss allowance on trade and other receivables
Recognition of unbilled handset and accessories revenue
l Note 12 Accounting for business combinations
l Note 14 Useful lives of property, plant and equipment
l Note 15
Lease terms and discount rates
l Note 16 Useful lives of intangible assets
l Note 16 Determination of the Group’s cash generating units
l Note 16
Impairment of intangible assets with indefinite lives
Estimates and judgements are continually evaluated. They are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the Group and that are believed to be
reasonable under the circumstances.
COVID-19 Pandemic
During the year to 31 December 2020, the COVID-19 outbreak has developed rapidly with significant measures to
contain the virus taken by the Australian Government and governments around the world. These measures have affected
economic activity and the telecommunications market, and also led to the Group undertaking measures to support
customers, all of which have impacted the Group’s financial performance during the period. The ongoing restrictions
in movement, in particular international travel, have seen reduced inbound related connections, visitor revenue and
international roaming revenues.
A thorough consideration of COVID-19 impacts on the business has not identified any significant impacts on the Group’s
31 December 2020 asset values, or significant risks giving rise to additional liabilities to be recognised at 31 December
2020. Management notes that the Group’s future financial performance, profitability and cash flow performance are
critical inputs to certain significant accounting judgements including recognition of deferred tax assets (Note 6),
recoverability of receivables (Note 9), impairment assessment of goodwill and intangibles with indefinite lives (Note 16),
and the Company’s financial risk management (Note 28).
Management has not identified any significant changes to its accounting judgements and estimates when considering
the impacts of COVID-19 on estimation uncertainty in preparing these accounting positions for the purposes of the full-
year financial report.
Full-Year Financial Results for the year ended 31 December 202070
Notes to the Consolidated Financial Statements continued
Note 3. Segment reporting
The Group determines operating segments based on the information that is internally provided to the senior
management team, who are the Group’s chief operating decision makers.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses. For all operating segments, discrete financial information is available and their operating results are
regularly reviewed by the Group’s senior management team to make decisions about resources to be allocated to each
segment and assess their performance.
During the second half of financial year, in light of the ongoing integration activities between the Company and TPG
Corporation, the senior management team has decided to adopt revised reporting segments, being the Consumer and
Corporate segments, to reflect how the Group is managed. Comparative balances have been restated to reflect the
updated reporting structure.
SEGMENT
PRINCIPAL ACTIVITIES
Consumer
Provision of telecommunications services to residential and small business customers.
Corporate
Provision of telecommunications services to corporate, government and wholesale customers.
Mobile small business customers have been categorised in Corporate.
Unallocated:
Unallocated includes:
l Transaction costs relating to the merger
l Impairment of Tech2
l Certain head office costs.
For the year ended 31 December 2020
Revenue from contracts with customers
Other income
Cost of provision of telecommunication services
Cost of handsets sold
Employee benefits expense
Other operating expenses
Results from segment activities
For the year ended 31 December 2019
Revenue from contracts with customers
Other income
Cost of provision of telecommunication services
Cost of handsets sold
Employee benefits expense
Other operating expenses
Results from segment activities
CONSUMER
$m
CORPORATE
$m
UNALLOCATED
$m
TOTAL
$m
3,706
–
(1,219)
(799)
(258)
(312)
1,118
3,167
–
(619)
(1,037)
(208)
(268)
1,035
644
–
(169)
(56)
(68)
(43)
308
346
–
(76)
(65)
(24)
(29)
152
–
11
–
–
(2)
(44)
(35)
–
10
–
–
–
(19)
(9)
4,350
11
(1,388)
(855)
(328)
(399)
1,391
3,513
10
(695)
(1,102)
(232)
(316)
1,178
71
2020
$m
1,391
2019
$m
1,178
(1,188)
(1,021)
203
(289)
(86)
157
(437)
(280)
Reconciliation of segment results to the Group’s loss before income tax is as follows:
Total segment results
Depreciation and amortisation expense
Results from operating activities
Net financing costs
Loss before income tax
Geographic information
The majority of the Group’s revenues are derived from Australian based entities, and no single customer generates
revenue greater than 10% of the Group’s total revenue. A geographic analysis of the Group’s non-current assets is set
out below:
Australia
Other
2020
$m
17,847
294
18,141
2019
$m
7,325
–
7,325
‘Other’ predominantly relates to submarine cables located in international waters.
Note 4. Revenue from contracts with customers
Revenue is recognised when (or as) the Group satisfies a performance obligation by transferring a promised good
or service to a customer. Revenue is measured based on the consideration specified in a contract with a customer.
Revenue is presented net of GST, rebates and discounts.
Revenue arrangements with multiple deliverables
Goods and services may be sold separately or in bundled packages. For bundled packages, e.g. mobile devices and
monthly service fees, the Group accounts for revenue from individual goods and services. The consideration for the
bundled packages comprises cash flows from the customers (expected to be received) in relation to goods and services
delivered over the contract term. The consideration (transaction price) is allocated between separate goods and services
in a bundle based on their relative stand-alone selling prices. Where a discount is provided to the customer for bundled
packages they are recognised in proportion with the hardware and service equivalent stand-alone prices.
Service revenue - Telecommunication services
The Group sells telecommunication services of the following nature: postpaid and prepaid mobile services, fixed data,
internet and voice services, insurance and content services. Telecommunication services include monthly access
charges for voice, messaging and data services, fees for connecting users of fixed line and other mobile providers to
the network and agreements entered into with other telecommunications networks. Set-up revenue for certain products
does not satisfy the definition of a performance obligation and is treated as part of the total contract price and allocated
over the identified performance obligations. Revenue from insurance and content services is recognised on a net basis
when the Group acts as agent. Revenue from telecommunication services are recognised over time in the accounting
period in which the services are rendered. Revenue is measured based on the consideration specified in a contract with
a customer.
Full-Year Financial Results for the year ended 31 December 202072
Notes to the Consolidated Financial Statements continued
Note 4. Revenue from contracts with customers continued
Hardware revenue
Revenue from the sale of handsets, modems and accessories is recognised at a point in time when the handsets and
accessories are delivered, the legal title has passed and the customer has accepted the goods.
For mobile devices sold in bundled contracts, customers are offered two options for payment – full payment at the
commencement of the contract or instalments over 12, 24 or 36 months. A handset and accessories receivable is
recognised for such instalment plans. Management have determined for instalment payments that a significant financing
component does not exist and has therefore not adjusted the transaction price for the time value of money.
The total transaction price for hardware revenue paid through instalments is subject to risks around collectability,
impacts of new plans and industry trends. Accordingly, accumulated experience is used to estimate the impacts of these
risks at the time of sale using a portfolio estimate. Each year, this experience is updated which can impact the estimate
of the transaction price.
(a) Major product categories
TIMING OF
REVENUE
RECOGNITION
Mobile – Postpaid
Over time
Mobile – Prepaid
Over time
Fixed
Over time
Data and Internet
Over time
Other service
revenue
Handsets and
accessories
Other hardware
revenue
Over time
Point in time
Point in time
CONSUMER
CORPORATE
TOTAL
2020
$m
1,459
444
890
–
69
815
29
3,706
2019
$m
1,579
434
45
–
57
1,042
10
3,167
2020
$m
237
–
–
265
85
56
1
644
2019
$m
261
–
–
3
16
65
1
346
2020
$m
1,696
444
890
265
154
871
30
4,350
2019
$m
1,840
434
45
3
73
1,107
11
3,513
(b) Assets and liabilities related to contracts with customers
Contracts assets (referred to as trade receivables) are amounts due from customers for goods and services performed
in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is
unconditional less loss allowance. Refer to Note 9 for further details.
Contract costs are recognised as an asset and expensed over the expected life of a customer contract consistent with the
transfer of the goods and services to which the capitalised costs relate to the customer. Refer to Note 16 for further details.
Contract liabilities
2020
$m
296
2019
$m
122
Contract liabilities relate to unearned revenue. Unearned revenue arises from consideration received from prepaid
services which have not been utilised, or from postpaid services which have not yet been provided. Contract liabilities
relating to prior year released during the year were $118 million (2019: $123 million).
(c) Remaining performance obligations
The Group has applied the practical expedient of not disclosing information about the amount of transaction price
allocated to the remaining (unfulfilled) performance obligations as the Group has a right to consideration in an amount
that corresponds directly with the value to the customer of the Group’s performance completed to date.
73
2020
$m
10
1
11
2019
$m
10
–
10
Note 5. Other profit and loss items
(a) Other income
Grant income
Other income
Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will
be received and the Group will comply with all attached conditions. Grant income relates to government grants that are
deferred and recognised in the Consolidated Income Statement over the period necessary to match them with the costs
that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in liabilities as deferred
income and are credited to Consolidated Income Statement on a straight-line basis over the expected lives of the
related assets.
(b) Employee benefits expense
Superannuation expense
Other employee benefits expense
(c) Other operating expenses
Advertising and promotion expenses
Consulting and outsourced services costs
IT and facilities expenses
Transaction costs associated with the merger
Administration and other expenses
(d) Depreciation and amortisation expense
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
(e) Net financing costs
Finance income
Interest income
Finance expenses
Amortisation of borrowing costs
Interest and finance charges for borrowings and lease liabilities
Interest income
Revenue from interest is recognised using the effective interest method.
2020
$m
2019
$m
23
305
328
85
115
25
36
138
399
530
151
507
19
213
232
72
97
17
19
111
316
507
166
348
1,188
1,021
(3)
(7)
13
279
289
7
437
437
Full-Year Financial Results for the year ended 31 December 202074
Notes to the Consolidated Financial Statements continued
Note 6. Income tax
The consolidated current tax payable or recoverable is based on taxable profit/(loss) for the year. Taxable profit differs
from profit reported in the Consolidated Income Statement because some items of income or expense are taxable or
deductible in different periods or may never be taxable or deductible. The Group’s liability for current tax is calculated
using Australian tax rates (and laws) that have been enacted or substantively enacted by the reporting date.
Tax is charged or credited to the Consolidated Income Statement, except when it relates to items charged or credited
directly to equity, in which case the tax is also recognised directly in equity.
Tax consolidation legislation
With effect from 13 July 2020, the wholly owned Australian subsidiaries acquired as part of the merger with TPG
Corporation entered the tax consolidated group, of which the Company is the head entity, in accordance with Australian
taxation law. The tax sharing agreement entered into between the entities within the tax consolidated group provides for
the determination of the allocation of the income tax liabilities between entities should the head entity default in its tax
payment obligations or if an entity should leave the tax consolidated group. The effect of the tax sharing agreement is
that the company’s liability for tax payable by the tax consolidated group is limited to the amount payable to the head
entity under the tax funding arrangement.
(a) Income tax expense
Current tax
Current tax expense on profit/(loss) for the period
Adjustments for current tax in respect of prior periods
Total current tax expense
NOTES
2020
$m
2019
$m
8
–
8
–
–
–
The Group has recognised $8 million of income tax expense relating to the period between 26 June 2020 and 13 July
incurred by TPG Corporation. At 31 December 2020, the Group has recorded a $3 million current tax payable.
Deferred tax
(Increase) in deferred tax assets
Decrease in deferred tax liabilities
Adjustments for deferred tax of prior periods
Total deferred tax (benefit)/expense
Income tax (benefit)/expense
6(d)
6(d)
(792)
(34)
(2)
(828)
(820)
–
–
–
–
–
(b) Numerical reconciliation between tax expense and pre-tax accounting profit/(loss)
Loss from operations before income tax
Income tax benefit using the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are (not deductible)/taxable in calculating taxable income:
Interest expense
Non-deductible expenses
Tax losses incurred during the year, not recognised
Initial recognition of deferred tax assets
Other
Income tax (benefit)/expense
(c) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Unused transferred tax losses for which no deferred tax asset has been recognised
Total tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 30% (2019: 30%)
75
(86)
(26)
–
13
–
(819)
12
(820)
2020
$m
–
2,275
2,275
683
(280)
(84)
52
–
32
–
–
–
2019
$m
2,081
2,275
4,356
1,307
The transferred losses of $2,275 million arose from the Vodafone and ‘3’ merger in 2009, and were transferred to VHA at
that time. These transferred losses are subject to an available fraction calculation which determines the rate at which the
transferred losses can be utilised.
(d) Deferred tax assets and liabilities
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between
the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases
used in the computation of taxable profit. It is accounted for using the liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from
goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where the associated entity is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realised, based on tax rates (and laws) that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Full-Year Financial Results for the year ended 31 December 202076
Notes to the Consolidated Financial Statements continued
Note 6. Income tax continued
Critical Estimates and Judgements: Recognition of deferred tax assets
Management judgement is required to determine the recognition of deferred tax assets, which is reviewed at the
end of each reporting period. The carrying amount of deferred tax assets is only recognised to the extent that it is
probable that sufficient taxable profit will be available in the future to utilise this benefit. This assessment requires
assumptions about the generation of future taxable profits derived from management’s estimates of future cash flows.
Judgements are also required about the application of income tax legislation. These judgements and assumptions
are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations,
which may impact the amount of deferred tax assets and deferred tax liabilities recognised in the Consolidated
Statement of Financial Position and the amount of tax losses and temporary differences not yet recognised.
Subsequent to the merger effective date, management has assessed the assumptions about the generation of
future taxable profits of the new merged Group based on management’s estimates of future cash flows, and have
recognised $226 million of previously unrecognised deferred tax assets relating to temporary differences and a
corresponding credit to the Consolidated Income Statement.
With regard to tax losses carried forward, the benefit of tax losses will only be obtained if the specific entity carrying
forward the tax losses derives future assessable income of an amount sufficient to enable the benefit from the
deductions for the losses to be realised, and the Company complies with the conditions for deductibility imposed
by tax legislation. At 31 December 2020, $590 million of deferred tax assets from tax losses have been recognised
based on management’s assessment of the availability of the tax losses, and the future rate of utilisation of tax losses
based on management’s estimates of future cash flows.
Amounts unrecognised as at the reporting date could be subsequently recognised if it becomes probable that future
taxable profit will allow the Group to benefit from these unrecognised tax losses.
Deferred tax assets
The balance comprises temporary differences attributable to:
Employee benefits
Deferred revenue
Property, plant and equipment
Provisions and accruals
Lease liabilities
Tax losses
Other
Unrealised foreign exchange movements
Temporary differences not recognised
Total deferred tax assets
Set off tax liabilities pursuant to set-off provisions
Net deferred tax assets
2020
$m
2019
$m
19
15
134
72
336
590
21
–
–
1,187
(923)
264
8
7
143
50
316
–
5
64
(302)
291
(291)
–
77
EMPLOYEE
BENEFITS
$m
DEFERRED
REVENUE
$m
PROPERTY,
PLANT AND
EQUIPMENT
$m
PROVISIONS
AND
ACCRUALS
$m
LEASE
LIABILITIES
$m
TAX
LOSSES
$m
OTHER
$m
UNREALISED
FOREIGN
EXCHANGE
MOVEMENTS
$m
TEMPORARY
DIFFERENCES
NOT
RECOGNISED
$m
TOTAL
$m
8
9
2
–
19
7
143
50
316
–
5
64
(302)
291
10
(2)
–
15
3
(12)
–
134
30
(8)
–
72
32
(12)
–
590
25
(4)
–
(64)
–
302
109
792
–
–
(5)
336
590
21
–
–
–
(5)
– 1,187
MOVEMENTS
At 1 January
2020
(Charged)/
credited
- Addition from
business
combination
- to profit or loss
- Reclassification
to assets held
for sale
At 31 December
2020
As at 31 December 2019, net temporary differences of $302 million were not recognised as it was considered that they
were not recoverable.
2020
$m
2019
$m
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Right-of-use assets
Intangible assets
Other
Set off tax liabilities pursuant to set-off provisions
Net deferred tax liabilities
298
612
13
923
(923)
–
MOVEMENTS
At 1 January 2020
(Charged)/credited
- Addition from business combination
- to profit or loss
At 31 December 2020
RIGHT-OF-
USE ASSETS
$m
INTANGIBLE
ASSETS
$m
OTHER
$m
289
24
(15)
298
–
637
(25)
612
2
5
6
13
289
–
2
291
(291)
–
TOTAL
$m
291
666
(34)
923
Full-Year Financial Results for the year ended 31 December 202078
Notes to the Consolidated Financial Statements continued
Note 7. Earnings per share
Basic and diluted earnings per share
UNITS
cents
2020
64
2019
(68)
Profit/(loss) attributable to the owners of the Company used in calculating
basic and diluted earnings per share ($m)
$m
741
(280)
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings per share
number
1,156,505,986
414,185,152
The Group presents basic and diluted earnings per share (‘EPS’) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to owners of the Company by the weighted average number of ordinary shares
during the period.
Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding for the effects of
all dilutive potential ordinary shares.
The weighted average number of ordinary shares has been retrospectively adjusted for the share consolidation on the
Company’s debt restructure which occurred during the period. Refer to Note 21 for further details.
Note 8. Cash and cash equivalents
For the purposes of presentation in the Consolidated Statement of Cash Flows, cash and cash equivalents include
cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value, and bank overdrafts that are repayable on demand and form an integral part of the
Group’s cash management.
(a) Restricted cash
At 31 December 2020, none of the cash and cash equivalents balance held by the Company were subject to restrictions
and therefore not available for general use by other entities within the Group (2019: $39 million). In the prior year, these
deposits supported various bank guarantees and a corporate credit card facility.
79
(b) Reconciliation of cash flows from operating activities
The presentation of cash flows from operating activities in the Consolidated Statement of Cash Flows has been changed
from an indirect to a direct method, as it provides more relevant information for the users of the financial report.
The comparative has been amended accordingly. The indirect method has been disclosed in the below table.
Cash flows from operating activities
Profit/(loss) for the year after income tax
Adjustments for:
Depreciation and amortisation expense
Net financing costs
Transaction costs relating to merger
Impairment expense
Movements in operating assets and liabilities:
Decrease in trade and other receivables
Decrease in inventories
(Increase) in prepayments
(Increase) in deferred tax assets
(Decrease)/increase in trade and other payables
(Decrease) in contract liabilities
(Decrease)/increase in other liabilities
Increase/(decrease) in provisions
2020
$m
2019
$m
734
(280)
1,188
289
36
10
1,021
437
19
–
2,257
1,197
45
59
(3)
(845)
(290)
(17)
(20)
2
(1,069)
49
26
(2)
–
10
–
34
(18)
99
Net cash generated from operating activities
1,188
1,296
(c) Non-cash investing and financing activities
Acquisition of right-of-use assets
Partial settlement of business combination through issuance of shares
Movement in use of supply chain financing for trade creditors
2020
$m
84
7,877
–
2019
$m
91
–
131
Full-Year Financial Results for the year ended 31 December 202080
Notes to the Consolidated Financial Statements continued
Note 8. Cash and cash equivalents continued
(d) Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Borrowings (current)
Borrowings (non-current)
Lease liabilities (current)
Lease liabilities (non-current)
Derivative financial instruments
Cash and cash equivalents
Gross debt (fixed interest rates)
Gross debt (variable interest rates)
Derivative financial instruments
2020
$m
120
–
(4,330)
(92)
2019
$m
734
(5,255)
(1,743)
(84)
(1,051)
(1,544)
(1)
129
(5,354)
(7,763)
120
(1,143)
(4,330)
(1)
734
(1,791)
(6,835)
129
(5,354)
(7,763)
Net debt at 1 January 2020
Acquired on business combination
Disposed on business combination
Cash flows
Lease acquisitions
Interest unwinding
Lease revaluations and terminations
Foreign exchange adjustments
Promissory notes received
Disposal of subsidiary (VHF)
Reclassification to assets held for sale
Proceeds from borrowings
Repayment of borrowings
Guarantee fees
CASH AND
CASH
EQUIVALENTS
$m
734
99
–
(327)
–
–
–
–
–
(379)
(7)
–
–
–
LEASE
LIABILITIES
$m
(1,628)
(115)
557
209
(100)
(84)
16
–
–
–
2
–
–
–
Net debt at 31 December 2020
120
(1,143)
BORROWINGS
$m
(6,998)
(2,047)
–
–
–
–
–
(97)
4,475
605
–
(4,780)
4,594
(82)
(4,330)
DERIVATIVE
FINANCIAL
INSTRUMENTS
$m
129
–
–
–
–
–
–
102
–
(232)
–
–
–
–
TOTAL
$m
(7,763)
(2,063)
557
(118)
(100)
(84)
16
5
4,475
(6)
(5)
(4,780)
4,594
(82)
(1)
(5,354)
CASH AND
CASH
EQUIVALENTS
$m
LEASE
LIABILITIES
$m
BORROWINGS
$m
DERIVATIVE
FINANCIAL
INSTRUMENTS
$m
Net debt at 1 January 2019
Impacts of AASB 16 Leases
Cash flows
Lease acquisitions
Interest unwinding
Lease revaluations and terminations
Foreign exchange adjustments
Realisation of derivatives
Proceeds from borrowings
Guarantee fees
642
–
92
–
–
–
–
–
–
–
(592)
(1,066)
209
(91)
(98)
10
–
–
–
–
Net debt at 31 December 2019
734
(1,628)
Note 9. Trade and other receivables
(7,004)
112
–
171
–
–
–
(13)
–
–
(152)
(6,998)
–
–
–
–
–
17
–
–
–
129
81
TOTAL
$m
(6,842)
(1,066)
472
(91)
(98)
10
4
–
–
(152)
(7,763)
Trade receivables are amounts due from customers for goods and services performed in the ordinary course of
business. Trade receivables are recognised initially at the amount of consideration that is unconditional less loss
allowance. Trade receivables are generally due for settlement within 30-60 days, except for handset and accessories
receivables which are collected over the term of the contract. For Handset and Accessories receivables which have not
been sold to third parties in accordance with the Group’s arrangements, these are initially recognised at the amount
expected to be recoverable over the term of the contract, subject to collectability reviews.
Collectability of receivables are reviewed on an ongoing basis. The Group applies the AASB 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance for all receivables. To measure the expected
credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over relevant historical periods before year end
and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to
reflect current and forward looking information on macroeconomic and commercial factors affecting the ability of the
customers to settle the receivables.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of internal recovery include inactive accounts, the failure of a debtor to engage in a repayment
plan with the Group and a failure to make contractual payments for a period of greater than 90 to 120 days past due.
Impairment losses on trade receivables are presented as impairment of receivables within other operating expenses in
the Consolidated Income Statement. Subsequent recoveries of amounts previously written off are credited against the
same line item.
The Group has entered into arrangements which allows them to sell certain handset and accessories receivables to a
third party.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
party. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable is recognised as handset receivable expense within other operating expenses in
the Consolidated Income Statement.
As the relevant criteria in AASB 9 Financial Instruments were satisfied, the fair value of the current receivables sold
were derecognised from the financial statements. At 31 December 2020, $153 million of its unsold handset receivables
(2019: $115 million) has yet to satisfy the qualifying criteria required under the risk transfer arrangement with third
parties, and are recognised as receivables by the Group.
Full-Year Financial Results for the year ended 31 December 202082
Notes to the Consolidated Financial Statements continued
Note 9. Trade and other receivables continued
Current
Trade receivables
Less: Provision for impairment of receivables
Handset and accessories receivables
Accrued revenue
Receivable from related parties
Other receivables
Non-current
Handset and accessories receivables
Other receivables
(a) Movement in provision for impairment of receivables
Balance at 1 January
Acquired provision from business combination
Provision for impairment recognised during the year
Change in estimate
Receivables written off during the year
Balance at 31 December
2020
$m
2019
$m
246
(37)
209
157
35
1
29
431
104
6
110
2020
$m
(11)
(29)
(18)
3
18
(37)
192
(11)
181
116
48
–
46
391
70
7
77
2019
$m
(14)
–
(2)
2
3
(11)
Critical Estimates and Judgements: Loss allowance on trade and other receivables
Management judgement is required to determine the allowance for doubtful debts for the Group’s trade receivables.
During the financial year, the loss assumptions used in determining the provision for trade and other receivables
were reviewed against, and updated to align with, actual debtor collectability using latest available data.
At 31 December 2020, this included a thorough assessment of COVID-19 impacts on potential increases in
the number of customers in financial hardship, future plans and measures to support customers, and inherent
uncertainties of the ongoing COVID-19 pandemic. This assessment led to an additional provision for impairment of
receivables estimate of $1 million (2019: nil), which has been reflected in the Consolidated Income Statement.
(b) Handset and accessories receivables
Handset and accessories receivables
Estimated future adjustments to unbilled revenue
Handset receivables sale expense
83
2020
$m
333
(72)
261
31
2019
$m
265
(79)
186
55
Critical Estimates and Judgements: Recognition of unbilled handset and accessories revenue
Management judgement is required to determine the potential future adjustments to handset and accessories
revenue. Handset and accessories revenue is recognised upfront, with cash collected from customers over the
instalment contract period. At the end of the reporting period, management assesses the risks associated with the
recovery of unsold handset receivables paid through instalments and potential future buy-backs of sold receivables,
and other loss risks relating to factors such as new plans, industry trends and company policies. During the financial
year, the Group has performed a detailed analysis of historical data and future expected trends to identify any
required revenue reversal to the original transaction price.
At 31 December 2020, this included an assessment of COVID-19 impacts on the aforementioned loss risk factors.
No significant impacts were identified that resulted in a change in the recognition of variable consideration of
hardware revenue during the financial year (2019: $26.1 million increase).
Note 10. Inventories
Finished goods include handsets, modems, other connectivity devices and accessories and are stated at the lower of
cost and net realisable value. Cost comprises the purchase price and any expenditure that is directly attributable to the
acquisition of the inventory after deducting rebates and discounts. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs necessary to make the sale.
Finished goods at net realisable value
2020
$m
51
2019
$m
103
Inventories expensed in the Consolidated Income Statement during the year ended 31 December 2020 amounted to
$807 million (2019: $1,012 million).
Note 11. Derivative financial instruments
Derivative financial instruments are utilised by the Group in the management of its foreign currency exposures. The
Group’s policy is not to utilise derivative financial instruments for trading or speculative purposes. Derivatives are initially
recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates
certain derivatives as:
l hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
l hedges of a risk associated with the cash flows of recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges).
At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and
hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes
in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its
hedge transactions. The fair values of derivative financial instruments designated in hedge relationships are separately
identified and disclosed. Movements in the hedging reserve are shown in Note 22. The full fair value of a hedging derivative
is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is
classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
For derivatives that are unhedged, changes in fair value are recognised in the Consolidated Income Statement.
Full-Year Financial Results for the year ended 31 December 202084
Notes to the Consolidated Financial Statements continued
Note 11. Derivative financial instruments continued
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in the cash flow hedge reserve within equity. The gain or loss relating to the ineffective portion is recognised
immediately in the Consolidated Income Statement within other income or other operating expenses.
The Group tests cash flow hedges for effectiveness at each reporting date both retrospectively and prospectively.
Amounts taken to ‘other comprehensive income’ are:
l transferred to the consolidated income statement when the hedged transaction affects profit or loss, such as, when
the hedged financial income or financial expense is recognised, or when a forecast transaction occurs,
l transferred to the initial carrying amount of the non-financial asset or liability where the hedged item is the cost of a
non-financial asset or non-financial liability, or
l transferred to the consolidated income statement immediately if the forecast transaction or firm commitment is no
longer expected to occur.
If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued
prospectively. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover,
or if its designation as a hedge is revoked (due to it being ineffective), amounts previously recognised in ‘other
comprehensive income’ remain in ‘other comprehensive income’ until the forecast transaction occurs.
Current assets
Cross currency swaps (related entities to Vodafone Group Plc)
Cross currency swaps (related entities to CK Hutchison Holdings Limited)
Forward foreign exchange contracts
Current liabilities
Forward foreign exchange contracts
(a) Cross currency swaps
2020
$m
2019
$m
–
–
–
–
1
65
65
–
130
1
The Group had a USD3.5 billion syndicated loan facility with a syndicate of lenders. The facility was based on the
3 month US LIBOR plus a margin and was scheduled to mature in November 2020. In order to protect against exchange
rate movements, the Group had in place cross currency swaps to coincide with the maturity of the loan. The swaps in
place cover 100% of the outstanding loan balance and have a fixed exchange rate and effectively swap US Dollar debt
for Australian Dollar debt. The Group’s effective rate of interest is based on the Australian 3 month BBSW plus a margin.
The swaps were entered into with related parties associated with the jointly controlling parent entities at the time
(refer to Note 24).The cross currency swaps are settled in full on the same date as the interest payment is made to the
facility agent.
The gain or loss on the hedging instrument is recognised in the Consolidated Income Statement and is expected to
broadly offset the revaluation on the syndicated loan facility.
On 9 July 2020, the Group’s USD3.5 billion syndicated loan facility and the associated cross currency swaps were
assumed by certain shareholders as part of the pre-merger completion debt restructuring steps.
85
(b) Forward foreign exchange contracts
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to
fluctuations in foreign exchange rates.
The Group procures a portion of its handsets, network equipment and technology support services from global
suppliers. In order to protect against exchange rate movements, the Group has entered into forward exchange contracts,
in a number of currencies, primarily US Dollar, Euro and Indian Rupee.
These contracts are hedging highly probable forecasted purchases for the ensuing financial year. The contracts are
timed to mature when payments for purchases are scheduled to be made.
Note 12. Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary company
comprises:
l fair values of assets transferred,
l liabilities incurred to the former owners of the acquired business,
l equity interest issued by the Group,
l fair value of any assets or liability resulting from a contingent consideration arrangement, and
l fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling
interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling
interest’s proportionate share of the acquired entity’s net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the
l consideration transferred,
l amount of any non-controlling interest in the acquired entity, and
l acquisition-date fair value of any previous equity interest in the acquired entity
over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair
value of the net identifiable assets of the business acquired, the difference is recognised in the Consolidated Income
Statement as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to
their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being
the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and
conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in the Consolidated Income Statement.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such
remeasurement are recognised in the Consolidated Income Statement.
Full-Year Financial Results for the year ended 31 December 202086
Notes to the Consolidated Financial Statements continued
Note 12. Business combinations continued
Merger of the Company and TPG Corporation
The merger of the Company and TPG Corporation became effective for accounting purposes on 26 June 2020 and was
completed on 13 July 2020.
The merger brings together two highly complementary businesses to create a leading integrated, full-service
telecommunications company with a comprehensive portfolio of fixed and mobile products for consumers, SMEs and
enterprises.
The merger was implemented through a Scheme of Arrangement under which the Company acquired all of the shares
in TPG Corporation in return for issuing shares in the Company to TPG Corporation shareholders.
The Scheme was approved by the Supreme Court of New South Wales on 26 June 2020 and became effective for
accounting purposes on that day, being the deemed date of effective control. The Scheme was implemented on
13 July 2020 when the agreed number of shares in the Company were issued to TPG Corporation shareholders.
TPG Corporation Limited changed its name from TPG Telecom Limited and was suspended from trading on the ASX
on 29 June 2020, and the Company changed its name to TPG Telecom Limited on 29 June 2020 and listed on the
ASX on 30 June 2020.
Between the accounting effective date (26 June 2020) and the merger completion date (13 July 2020) there were
several restructuring steps that needed to be implemented by both the Company and TPG Corporation in accordance
with the Scheme Implementation Deed.
Acquisition related costs of $36 million are included in Other Operating Expenses in the Consolidated Income Statement
for the year ended 31 December 2020 (2019: $19 million).
TPG Corporation’s contribution to the Group’s results for the six months and four day period from 26 June 2020 to
31 December 2020 was revenue of $1,237 million and net profit after tax of $219 million. If the merger had been
effective from 1 January 2020, management estimates that the Group would have revenue of $5,517 million and net
profit after tax of $283 million for the year ended 31 December 2020.
Critical Estimates and Judgements: Business combinations
Accounting for mergers and acquisitions is inherently complex, requiring a number of judgements and estimates to
be made.
The merger of the Company and TPG Corporation became effective for accounting purposes during the period.
The merger was effected through a Scheme of Arrangement under which the Company acquired all of the shares in
TPG Corporation.
In relation to the fair value of the Scheme consideration, the Company acquired TPG Corporation through the issue
of shares in the Company (one TPG Telecom share for every TPG Corporation share). For accounting purposes, the
acquisition date was 26 June 2020. TPG Telecom was listed on the ASX on a deferred settlement basis on 30 June
2020. TPG Telecom commenced trading on an ordinary settlement basis on 14 July 2020. Management has reviewed
the reliability of available information and inputs on each relevant date, in particular with regard to the fair value
hierarchy under AASB 13, and has assessed that the TPG Telecom quoted share price on 30 June 2020 represents the
most reliable measure of the fair value of the Scheme consideration at the acquisition date (26 June 2020).
Management judgement is required to determine the fair value of identifiable assets and liabilities acquired in
business combinations. A number of judgements have been made in relation to the identification of fair values
attributable to separately identifiable assets and liabilities acquired, including customer relationships and brands.
The determination of fair values require the use of valuation techniques based on assumptions including future cash
flows, revenue growth, margins, customer attrition rates and weighted-average cost of capital.
The initial accounting for the acquisition of TPG Corporation was provisionally determined at 30 June 2020.
In accordance with AASB 3, the Group has twelve months from the date of acquisition to finalise the purchase price
accounting and allocation of fair value to goodwill and other indefinite life intangible assets. At the date of the
finalisation of the annual report for the year ended 31 December 2020, market valuations and other calculations had
not yet been finalised, and the fair value of the assets and liabilities, including deferred tax balances and goodwill,
were therefore only provisionally determined based on management’s best estimate of the likely value.
Purchase consideration
Shares issued1
Acquisition of spectrum held in Mobile JV2
Settlement of pre-existing relationships3
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Provisional fair value4
Cash and cash equivalents
Trade and other receivables
Inventories
Deferred tax liabilities
Other assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Provisions
Assets classified as held for distribution5
Acquired pre-acquisition dividends payable6
Net identifiable assets acquired
Less: Non-controlling interests acquired4
Add: provisional goodwill4
87
NOTE
$m
7,877
(129)
(77)
7,671
99
124
7
(557)
25
1,491
99
3,431
(272)
(194)
(2,047)
(115)
(89)
2,002
512
(991)
1,523
(7)
6,155
7,671
6
14
15
16
18
15
16
1. Fair value of shares issued
The Company acquired TPG Corporation through the issue of shares in the Company (one TPG Telecom share for every TPG Corporation share).
For accounting purposes, the acquisition date was 26 June 2020. TPG Telecom was listed on the ASX on a deferred settlement basis on 30 June 2020.
TPG Telecom commenced trading on an ordinary settlement basis on 14 July 2020. Management has reviewed the reliability of available information
and inputs on each relevant date, in particular with regard to the fair value hierarchy under AASB 13, and has assessed that the TPG Telecom quoted
share price on 30 June 2020 represents the most reliable measure of the fair value of the Scheme consideration at the acquisition date (26 June 2020).
2. Acquisition of spectrum held in Mobile JV
Mobile JV was established as a joint venture between the Company and TPG Corporation to purchase 3.6 GHz spectrum at the auction conducted in
November 2018. Prior to 26 June 2020, the Company funded its 50% share of the 3.6 GHz spectrum payment, being $132 million. On acquisition of
TPG Corporation, the Company acquired the remaining 50% share of Mobile JV. The Group has recognised the acquisition of TPG Corporation’s interest
in the spectrum asset as a step asset acquisition and recognised $257 million in spectrum licences. The total underlying asset is measured at fair value
on the date of acquisition.
3. Settlement of pre-existing relationships
On the accounting acquisition date (26 June 2020), the Company held $14 million of MVNO and Interconnect receivables, $473 million of right-of-use
assets and $564 million of lease liabilities relating to the Company’s access to dark fibre links, of which TPG Corporation was the counterparty. These
receivables and liabilities are considered to be effectively settled on the merger effective date. These pre-existing contractual relationships have been
assessed to reflect market value at the acquisition date, and no gain or loss has been recognised in the Consolidated Income Statement.
4. Provisional fair value of acquired assets liabilities, non-controlling interest and goodwill recognised
In accordance with AASB 3, the Group has twelve months from the date of acquisition (26 June 2020) to finalise the purchase price accounting and
allocation of fair value to goodwill and other indefinite lived intangible assets. Hence, acquired balances in other notes to the financial statements are
disclosed at provisional values.
Full-Year Financial Results for the year ended 31 December 2020
88
Notes to the Consolidated Financial Statements continued
Note 12. Business combinations continued
5. Acquired assets classified as held for distribution
The acquired assets held for distribution, as valued by an independent valuation assessment, represent the net assets of Tuas Limited, which was
demerged by way of an in-specie distribution of Tuas shares to TPG Corporation’s pre-merger shareholders immediately prior to implementation of
the merger on 13 July 2020. The operating results of Tuas between the merger accounting effective date (26 June) and 13 July 2020 were not material
to the Group’s results for the year and have therefore not been reflected in the Group’s Consolidated Income Statement for the year.
6. Acquired pre-acquisition dividends payable
Total acquired pre-acquisition dividends payable comprise $479 million relating to the special cash dividend and $512 million relating to the Tuas In-
Specie Dividend, which were distributed to TPG Corporation’s pre-merger shareholders on 13 July 2020.
Note 13. Interests in other entities
(a) Subsidiaries
Investments in subsidiaries are measured at cost in the Company’s financial statements. The following is a list of all
entities that formed part of the Group as at 31 December 2020.
NAME OF ENTITY
Vodafone Hutchison Finance Pty Limited (‘VHF’)
Vodafone Hutchison Spectrum Pty Limited
Vodafone Hutchison Receivables Pty Limited
H3GA Properties (No. 3) Pty Limited
Vodafone Foundation Australia Pty Limited
Vodafone Australia Pty Limited
Vodafone Pty Limited
Vodafone Network Pty Limited
Mobileworld Operating Pty Ltd
Mobileworld Communications Pty Ltd
Mobile JV Pty Limited (‘Mobile JV’)
AAPT Limited
ACN 088 889 230 Pty Ltd
ACN 139 798 404 Pty Ltd
Adam Internet Holdings Pty Ltd
Adam Internet Pty Ltd
Agile Pty Ltd
Alchemyit Pty Ltd
Blue Call Pty Ltd
Cable Licence Holdings Pty Ltd
Chariot Pty Ltd
Chime Communications Pty Ltd
Connect Internet Solutions Pty Limited
Connect West Pty Ltd
Destra Communications Pty Ltd
Digiplus Contracts Pty Ltd
Digiplus Holdings Pty Ltd
NOTES
COUNTRY OF
INCORPORATION
2020
%
2019
%
EQUITY HOLDING
1
4
4
4
4
4
4
4
2,4
3,4
3,4
3,4
3,4
3,4
3,4
3
3,4
3,4
3,4
3,4
3,4
3,4
3
3,4
3,4
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
89
NOTES
COUNTRY OF
INCORPORATION
2020
%
2019
%
EQUITY HOLDING
3,4
3,4
3,4
3
3
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3
3,4
3,4
3,4
3,4
3
3
3,4
3
3
3,4
3,4
3,4
3,4
3,4
3
3
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Philippines
Australia
Australia
Australia
Australia
Australia
USA
Bermuda
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
88.57
99.99
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NAME OF ENTITY
Digiplus Investments Pty Ltd
Digiplus Pty Ltd
FTTB Wholesale Pty Ltd
Gizmo Corporation Pty Ltd
Hosteddesktop.com Pty Ltd
iHug Pty Ltd
iiNet (New Zealand) AKL Ltd
iiNet (OzEmail) Pty Ltd
iiNet Labs Pty Ltd
iiNet Limited
Internode Pty Ltd
Intrapower Pty Ltd
Intrapower Terrestrial Pty Ltd
IP Group Pty Ltd
IP Service Xchange Pty Ltd
Jiva Pty Ltd
Kooee Communications Pty Ltd
Kooee Mobile Pty Ltd
Kooee Pty Ltd
Mercury Connect Pty Ltd
Neighbourhood Cable Unit Trust
Netspace Online Systems Pty Ltd
Numillar IPS Pty Ltd
Orchid Cybertech Services Incorporated
Orchid Human Resources Pty Ltd
PIPE International (Australia) Pty Ltd
PIPE Networks Pty Ltd
PIPE Transmission Pty Ltd
PowerTel Limited
PPC 1 (US) Incorporated
PPC 1 Limited
Request Broadband Pty Ltd
Soul Communications Pty Ltd
Soul Contracts Pty Ltd
Soul Pattinson Telecommunications Pty Ltd
SPT Telecommunications Pty Ltd
SPTCom Pty Ltd
Telecom Enterprises Australia Pty Limited
Telecom New Zealand Australia Pty Limited
Full-Year Financial Results for the year ended 31 December 202090
Notes to the Consolidated Financial Statements continued
Note 13. Interests in other entities continued
NAME OF ENTITY
TPG (NZ) Pty Ltd
TPG Corporation Limited
TPG Energy Pty Ltd
TPG Holdings Pty Ltd
TPG Internet Pty Ltd
TPG JV Company Pty Ltd
TPG Network Pty Ltd
TransACT Broadcasting Pty Ltd
TransACT Capital Communications Pty Ltd
TransACT Communications Pty Ltd
TransACT Victoria Communications Pty Ltd
TransACT Victoria Holdings Pty Ltd
Transflicks Pty Ltd
Trusted Cloud Pty Ltd
Trusted Cloud Solutions Pty Ltd
Value Added Network Pty Ltd
Virtual Desktop Pty Ltd
VtalkVoip Pty Ltd
Westnet Pty Ltd
Tech2 Business Solutions Pty Ltd
Tech2Home Proprietary Ltd
Tech2Home Pty Ltd
Tech2Home (Communications) Pty Ltd
The Tech2 Group Pty Ltd
NOTES
COUNTRY OF
INCORPORATION
2020
%
2019
%
EQUITY HOLDING
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3,4
3
3,4
3,4
3
3,4
3,5
3,5
3,5
3,5
3,5
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
60
60
60
60
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. On 9 July 2020, the Company’s 100% ownership in VHF was transferred to Vodafone Hutchison (Australia) Holdings Limited, a UK incorporated
company jointly controlled by entities in the CK Hutchison Holdings (‘CKHH’) and Vodafone Groups. On disposal of the subsidiary, $379 million of cash
and cash equivalents held in VHF were transferred out of the Group.
2. The entity was established as a joint venture between the Company and TPG Corporation including to purchase 3.6 GHz spectrum at the auction
conducted in November 2018. As part of the merger, the entity is now 100% owned by the Group and included in the consolidated results. The entity
had no material balances as at 31 December 2019 and therefore no significant impact arises from moving from the equity method of accounting to
consolidation. Refer to Note 12 for further details.
3. These companies were acquired as part of the merger between the Company and TPG Corporation on 13 July 2020. These entities previously had a
31 July year-end, which has since been changed to 31 December to align with the Group. TPG Telecom Pte Ltd and Tuas Limited were distributed to
TPG Corporation’s pre-merger shareholders on 13 July 2020.
4. Pursuant to the ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, these wholly-owned subsidiaries within the Closed Group are
relieved from the Corporations Act 2001 (Cth) requirements to prepare and lodge separate financial reports for the year ended 31 December 2020
(to the extent they apply).
5. On 31 December 2020, the Group classified its 60% investment in Tech2 as held for sale. Refer to Note 13(c) below for further details.
91
(b) Joint ventures
Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal
structure of the joint arrangement.
Joint ventures
Interests in joint ventures are accounted for using the equity method after initially being recognised at cost in the
consolidated statement of financial position.
Equity method
Under the equity method of accounting, investments are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of
movements in other comprehensive income of the investee in other comprehensive income. Dividends received or
receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity,
including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent
of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described
in Note 14.
NAME OF ENTITY
3GIS Pty Limited
3GIS Properties (No 1) Pty Limited
3GIS Properties (No 2) Pty Limited
Tovadan Pty Limited
Mondjay Pty Limited
(c) Investment classified as held for sale
EQUITY HOLDING
COUNTRY OF
INCORPORATION
2020
%
2019
%
Australia
Australia
Australia
Australia
Australia
50
50
50
50
50
50
50
50
50
50
Tech2 is a 60% owned subsidiary within the Group. Its immediate parent (which holds the 60% interest) is iiNet Limited,
a wholly owned subsidiary of the Group. On 31 December 2020, a resolution of the directors of Tech2 was passed
resolving to enter into a share buy-back deed under which Tech2 will buy back the shares owned by iiNet, subject to
approval of the shareholders of Tech2. The effect of the share buy-back transaction will be that the Group will divest of
its interest in Tech2. The buy-back is expected to be completed in January 2021. Refer to Note 30 for further details.
At 31 December 2020, the Group has recognised its interest in Tech2 as a disposal group classified as held for sale,
as the carrying amount of its investment will be recovered principally through a sale transaction rather than through
continuing use and a sale is considered highly probable. Assets (and disposal groups) classified as held for sale are
measured at the lower of their carrying amount and fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value
less costs to sell. On 31 December 2020, the Group has recognised a $9 million impairment of its investment in Tech2 in
the Consolidated Income Statement.
Full-Year Financial Results for the year ended 31 December 202092
Notes to the Consolidated Financial Statements continued
Note 14. Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical
cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for its
intended use. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying
asset are included as part of the cost of that asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repairs and maintenance are charged to the Consolidated Income Statement
during the financial period in which they are incurred.
Depreciation
Depreciation is provided on property, plant and equipment excluding land. Depreciation is calculated on a straight-line
basis to write off the depreciable amount of each item of property, plant and equipment over its expected useful life to
the Group. The assets’ residual values and useful lives are reviewed at each reporting date and adjusted if appropriate.
Assets are depreciated from the date they are brought into commercial service, or in respect of internally constructed
assets from the time the asset is completed and is available for commercial use. The cost of internally constructed assets
includes the cost of materials, direct labour, and the initial estimate, where relevant, of the costs of dismantling and
removing the items and restoring the site on which they are located.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment. The expected useful lives are as follows:
Buildings
Leasehold improvements
40 years
4 to 8 years
Network equipment and infrastructure
3 to 25 years
The depreciable amount of improvements to or on leasehold properties and leased plant and equipment is amortised
over the unexpired period of the lease or the estimated useful life of the improvement to the Group, whichever is the
shorter.
Depreciation rates and methods are reviewed at least annually and adjusted on a prospective basis as required by
accounting standards.
Critical Estimates and Judgements: Useful lives of property, plant and equipment
Management judgement is required to determine the estimated useful lives of property, plant and equipment for the
basis of the depreciation period over which economic benefit will be derived from the asset. The Group reviews the
useful lives at the end of each reporting period, based on management’s expected life of each asset class, including
expected use of specific assets and other relevant factors such as any expected changes in technology.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of
disposal and value in use.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in
the Consolidated Income Statement.
Impairment of assets
Non-financial assets other than goodwill are tested for impairment at each reporting date or whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. This includes intangible assets in
the course of construction. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or
groups of assets (cash-generating units). An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. Impairment losses are recognised in the Consolidated Income Statement unless
an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that
previous revaluation with any excess recognised through profit or loss. Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period or when
there is an indication that the impairment loss may no longer exist. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised.
93
LAND AND
BUILDINGS
$m
LEASEHOLD
IMPROVEMENTS
$m
NETWORK
EQUIPMENT AND
INFRASTRUCTURE
$m
ASSETS UNDER
CONSTRUCTION
$m
TOTAL
$m
Cost
Balance at 1 January 2020
Additions from business combination
Additions
Transfers
Write-off
Balance at 31 December 2020
Accumulated depreciation
Balance at 1 January 2020
Depreciation
Write-off
Balance at 31 December 2020
At 31 December 2020
Cost
Accumulated depreciation
Net book amount
Cost
Balance at 1 January 2019
Adjustment for adoption of AASB 16
Revised balance at 1 January 2019
Additions
Transfers
Write-off
Balance at 31 December 2019
Accumulated depreciation
Balance at 1 January 2019
Adjustment for adoption of AASB 16
Revised balance at 1 January 2019
Depreciation
Write-off
Balance at 31 December 2019
At 31 December 2019
Cost
Accumulated depreciation
Net book amount
–
43
–
–
–
43
–
(1)
–
(1)
43
(1)
42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
102
3
–
8
(2)
111
(72)
(15)
2
(85)
111
(85)
26
95
–
95
–
10
(3)
102
(62)
–
(62)
(13)
3
(72)
102
(72)
30
4,609
1,407
85
214
(278)
6,037
(3,011)
(514)
266
(3,259)
6,037
(3,259)
2,778
4,983
(586)
4,397
–
346
(134)
4,609
(2,694)
60
(2,634)
(511)
134
(3,011)
4,609
(3,011)
1,598
241
38
484
(347)
–
416
(4)
–
–
(4)
416
(4)
412
328
(1)
327
420
(515)
9
241
(12)
–
(12)
17
(9)
(4)
241
(4)
237
4,952
1,491
569
(125)
(280)
6,607
(3,087)
(530)
268
(3,349)
6,607
(3,349)
3,258
5,406
(587)
4,819
420
(159)
(128)
4,952
(2,768)
60
(2,708)
(507)
128
(3,087)
4,952
(3,087)
1,865
Full-Year Financial Results for the year ended 31 December 202094
Notes to the Consolidated Financial Statements continued
Note 15. Right-of-use assets and lease liabilities
At the inception of a contract, the Group assesses whether the contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Group has leases for various network sites, offices, retail stores and data centres. Rental contracts may contain both
lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease
components based on their relative stand-alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the
lessor. Leased assets may not be used as security for borrowing purposes.
Critical Estimates and Judgements: Determining lease term
Management judgement is required to determine the lease term for leases that include additional optional extension
periods beyond the initial non-cancellable period. As a lessee, extension periods are included in the lease term
in determining the lease liability if the Group is reasonably certain that the extension option will be exercised.
An assessment of the likelihood of exercising renewal options, based on relevant facts and circumstances, such as
historical lease durations, costs and business disruption required to replace the leased asset or relocate the site,
the existence of termination penalties and the Group’s future plans, is performed on initial recognition of the lease.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged
to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a
significant change in circumstances occurs, which affects this assessment, and that is within the control of the Group.
For the Group’s network lease portfolio, renewal options are generally included in the lease term, as it is
reasonably certain, based on the type and use of the underlying asset, that the lease will be extended. The length
of the initial lease term is also considered, as the likelihood of exercising an option diminishes the longer the
non-cancellable period.
For the Group’s commercial lease portfolio, which includes office buildings, data centres and retail stores, renewal
options are generally not included in the lease term, and is assessed against the Group’s plan for its corporate and
retail footprint.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised
on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or
less. Low-value assets comprise IT equipment and typically have an underlying value of less than $10,000AUD.
Initial measurement
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
l fixed payments (including in-substance fixed payments), less any lease incentives receivable,
l variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date,
l amounts expected to be payable by the Group under residual value guarantees,
l the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and
l payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Right-of-use assets are measured at cost comprising the following:
l the amount of the initial measurement of lease liability,
l any lease payments made at or before the commencement date less any lease incentives received,
l any initial direct costs, and
l restoration costs.
95
Critical Estimates and Judgements: Determining incremental borrowing rate
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used.
Management judgement is required to determine the incremental borrowing rate used to measure the Group’s
network and commercial leases. Management is of the view that interest rates implicit in the Group’s leases are not
readily determinable.
The incremental borrowing rate represents the rate that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions. To determine the incremental borrowing rate, the Group where possible, uses recent
third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing
conditions since third party financing was received and makes adjustments specific to the lease, e.g. term of lease.
Subsequent measurement
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not
included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take
effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-
line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the
underlying asset’s useful life.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of
disposal and value in use.
Subleases
The Group has entered into lease agreements as an intermediate lessor for various retail stores and offices. When the
Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease
is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net
investment in the leases. The net investment in each sublease is determined by discounting the rental payments
expected to be received from the sublessee over the term of the sublease. The interest income associated with the
discounting of the rental payments is recognised over the term of the sublease.
Site Sharing Agreements
The Group has entered into a Site Sharing Agreement for various network sites. The purpose of this agreement is to
share the costs relating to telecommunication equipment on certain network sites. Under this Agreement, access to
network sites is granted to the other party in return for an access fee, which is settled on a net basis each quarter.
The Group considers the core purpose of the Agreement is for the convenience of each party rather than to generate
lease income. The Group accounts for the subleases arising from the exchange of access fees on a net basis, as the
exchanged right-of-use assets are similar in nature, the timing of cash flows between the parties mirrors the timing of
receipts/payments under the head lease agreements, and the amount of cash flows is not expected to be materially
different between the exchanged right-of-use assets. The Group is in a net payment position under the Agreement,
and as a result the Group recognises a right-of-use asset and lease liability for the net payment portion in accordance
with AASB 16.
Impairment of assets
Refer to Note 14 for the Group’s non-financial asset impairment policy.
Full-Year Financial Results for the year ended 31 December 202096
Notes to the Consolidated Financial Statements continued
Note 15. Right-of-use assets and lease liabilities continued
Right-of-use assets
Commercial properties
Network properties
Lease liabilities
Current
Non-current
2020
$m
165
847
1,012
92
1,051
1,143
2019
$m
200
1,254
1,454
84
1,544
1,628
Additions to the right-of-use assets during the 2020 financial year were $84 million (2019: $91 million). The merger
between the Company and TPG Corporation became effective for accounting purposes on 26 June 2020 and
$99 million of right of use assets and $115 million of lease liabilities were acquired on this date as a result of the merger.
On the accounting acquisition date, the Group derecognised $473 million of right-of-use assets and $564 million of
lease liabilities relating to the Company’s access to dark fibre links, of which TPG Corporation was the counterparty.
Refer to Note 12 for further details.
The Consolidated Income Statement shows the following amounts relating to leases:
Depreciation of right-of-use assets
Commercial properties
Network properties
Interest on lease liabilities
Interest expense (included in finance expenses)
Expense relating to short-term leases (included in other operating expenses)
Expense relating to leases of low-value assets not shown above as short-term leases
(included in other operating expenses)
The total cash outflow for leases in 2020 was $207 million (2019: $215 million).
44
107
151
84
13
1
44
122
166
98
10
1
97
Note 16. Intangible assets
Goodwill
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition
date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-
controlling interest in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree
(if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If,
after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any), the excess is recognised immediately in the Consolidated Income
Statement as a bargain purchase gain.
Goodwill is classified as an indefinite life intangible asset. Goodwill is not subject to amortisation and is tested annually
for impairment, or more frequently, if events or changes in circumstances indicate that it might be impaired. Goodwill is
allocated to cash generating units for the purpose of impairment testing.
Brand names
On acquisition of a subsidiary, brands of the acquired subsidiary are valued and brought to account as intangible assets.
The value is calculated using the relief from royalty method. Brand names are classified as either finite or indefinite life
intangible assets depending on the Group’s assessment of the expected pattern of economic benefits that they will
generate for the Group.
Amortisation is charged to the Consolidated Income Statement on a straight line basis over the estimated useful lives
for the finite life brand names. Indefinite life brand names are not subject to amortisation and are tested annually for
impairment, or more frequently, if events or changes in circumstances indicate that it might be impaired. Indefinite life
brand names are allocated to cash generating units for the purpose of impairment testing.
Computer software
Computer software comprises computer software purchased from third parties as well as the cost of internally
developed software. Computer software licences are capitalised on the basis of the costs incurred to acquire and bring
into use the specific software. Costs that are directly associated with the production of identifiable and unique software
products controlled by the Group and are probable of producing future economic benefits are recognised as intangible
assets. Direct costs include software development employee costs and directly attributable overheads. Software integral
to a related item of hardware equipment is accounted for as property, plant and equipment.
Costs associated with maintaining computer software programs are recognised as an expense when they are incurred.
Internally developed software is recognised only if all of the following conditions are met:
l an asset is created that can be separately identified;
l it is probable that the asset created will generate future economic benefits; and
l the development cost of the asset can be measured reliably.
On acquisition of a subsidiary, internally developed software and systems are valued and brought to account as
intangible assets. The software is valued at its amortised replacement cost.
Amortisation is charged to the Consolidated Income Statement on a straight line basis over the estimated useful lives
from the date the software is available for use.
The carrying values of these intangible assets are reviewed on a regular basis and written down to the recoverable
amount where this is less than the carrying value.
Full-Year Financial Results for the year ended 31 December 202098
Notes to the Consolidated Financial Statements continued
Note 16. Intangible assets continued
Spectrum licences
Costs associated with acquiring spectrum licences are capitalised. The amortisation of the spectrum licences
commences upon the later of the readiness of the network and the spectrum licences being allocated. The spectrum
licences are amortised on a straight line basis over the periods of their expected benefit. The carrying values of these
intangible assets are reviewed on a regular basis and written down to the recoverable amount where this is less than the
carrying value.
Contract costs
Under AASB 15 Revenue from Contracts with Customers, incremental costs associated with acquiring and renewing a
contract that are expected to be recovered are required to be initially recognised as an asset and expensed over the
expected life of a customer contract consistent with the transfer to the customer of the goods and services to which the
capitalised costs relate. The carrying values of these assets are reviewed on a regular basis. Contracts costs associated
with acquiring and renewing a service contract are capitalised and amortised over the life of the contract. Contract
costs associated with the sale of handsets are capitalised and amortised upfront in line with transfer of handsets to the
customer.
Connection costs, being costs of fulfilling orders, are capitalised and amortised over the life of the contract.
Acquired customer bases
On acquisition of a subsidiary, customer contracts and relationships of the acquired subsidiary are valued based on
their expected future economic benefits (using discounted cash flow projections) and brought to account as intangible
assets. The acquired customer bases are amortised to the Consolidated Income Statement on a straight line basis in line
with the expected economic benefits to be derived.
Indefeasible rights of use of capacity (‘IRUs’)
Indefeasible rights of use (‘IRUs’) of acquired network capacity are brought to account as intangible assets at the present
value of the future cash flows payable for the right. IRUs of acquired subsidiaries are accounted for at their fair value as
at the date of acquisition. Amortisation is charged to the Consolidated Income Statement on a straight-line basis over
the estimated useful lives of the IRU contracts.
Amortisation
The expected useful lives of the intangible assets, other than goodwill and indefinite life brand names, are as follows:
Definite life brand name
1 to 5 years
Spectrum licences
12 to 15 years
Computer software
Contract costs
Customer bases
3 to 7 years
1 to 3 years
8 to 15 years
Indefeasible rights of use (IRU)
4 to 22 years
Critical Estimates and Judgements: Useful lives of intangible assets
Management judgement is required to determine the estimated useful lives of intangible assets for the basis of the
amortisation period over which economic benefit will be derived from the asset. The Group reviews the useful lives
at the end of each reporting period, based on management’s expected life of each asset class, including expected
use of specific assets and other relevant factors such as any expected changes in technology.
99
BRAND
NAMES
$m
SPECTRUM
LICENCES
$m
COMPUTER
SOFTWARE
$m
CONTRACT
COSTS
$m
CUSTOMER
BASES
$m
IRUS
$m
GOODWILL
$m
TOTAL
$m
2
1,594
906
107
–
–
2,413
5,022
423
1,094
–
–
–
–
257
–
–
–
26
–
3
125
(208)
11
–
63
–
(76)
1,689
188
6,155
9,586
–
–
–
–
–
13
–
–
–
–
–
–
257
79
125
(284)
425
2,945
852
105
1,689
201
8,568
14,785
(433)
(187)
–
(590)
(161)
208
(620)
(543)
2,945
(620)
2,325
1,594
–
–
–
852
(543)
309
750
–
159
(3)
1,594
906
(318)
(115)
–
–
(430)
(162)
(1)
3
(433)
(590)
1,594
(433)
1,161
906
(590)
316
(69)
(67)
76
(60)
105
(60)
45
138
68
–
(99)
107
(97)
(71)
–
99
(69)
107
(69)
38
–
–
(82)
(10)
–
–
(82)
(10)
–
–
–
–
(1,093)
(507)
284
(1,316)
1,689
201
8,568
14,785
(82)
(10)
–
(1,316)
1,607
191
8,568 13,469
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,413
4,897
–
–
–
68
159
(102)
2,413
5,022
–
–
–
–
–
(846)
(348)
(1)
102
(1,093)
2,413
5,022
–
(1,093)
2,413
3,929
Cost
Balance at
1 January 2020
Additions from
business combination
Additions relating
to joint venture
Additions
Transfers
Write-off
Balance at
31 December 2020
Accumulated amortisation
Balance at
1 January 2020
Amortisation
Write-off
Balance at
31 December 2020
At 31 December 2020
Cost
Accumulated amortisation
Net book amount
Cost
Balance at 1 January 2019
Additions
Transfers
Write-off
Balance at
31 December 2019
(1)
–
–
(1)
425
(1)
424
2
–
–
–
2
Accumulated amortisation
Balance at 1 January 2019
(1)
Amortisation
Transfers
Write-off
Balance at
31 December 2019
At 31 December 2019
Cost
Accumulated amortisation
Net book amount
–
–
–
(1)
2
(1)
1
Full-Year Financial Results for the year ended 31 December 2020
100
Notes to the Consolidated Financial Statements continued
Note 16. Intangible assets continued
Impairment of assets (definite useful live intangibles)
Refer to Note 14 for the Group’s non-financial asset impairment policy.
Impairment testing for intangible assets with indefinite useful lives
Indefinite life intangible assets, such as goodwill and brand names, are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash inflows known as cash generating units (‘CGUs’).
Critical Estimates and Judgements: Determining the Group’s cash generating units
Management judgement is required in determining the Group’s CGUs. Management is of the view that the Group’s
telecommunications network is integrated in nature, and no single component of the network individually generates
cash flows from delivering products and services. For the purposes of goodwill allocation and impairment testing,
management is of the view that the manner in which operations are monitored by management best reflects the
Group’s CGUs.
During the financial year, there have been changes to the manner in which the Group’s operations are monitored,
and hence changes to the Group’s identified CGUs with allocated goodwill. At 31 December 2019, which was prior
to the merger with TPG Corporation, management had identified one CGU, being the TPG Telecom (then VHA)
CGU. At 31 December 2020, the Group has identified the Consumer and Corporate Groups to be the lowest level at
which goodwill is monitored for internal management purposes. This has resulted in a change in the allocation of
pre-merger goodwill held in TPG Telecom (then VHA).
Consumer Group
Corporate Group
TPG Telecom (then VHA)
2020
2019
BRAND
NAMES
$m
GOODWILL1
$m
326
98
–
424
6,449
2,119
–
8,568
TOTAL
$m
6,775
2,217
–
8,992
BRAND
NAMES
$m
GOODWILL
$m
TOTAL
$m
–
–
1
1
–
–
2,413
2,413
–
–
2,414
2,414
1. The goodwill allocation at 31 December 2020 includes provisional goodwill of $6,155 million arising from the acquisition of TPG Corporation. Refer to
Note 12 for further details.
A CGU is impaired when the recoverable amount of the CGU is lower than the carrying amount of the CGU.
The recoverable amount is the higher of an asset’s value-in-use and fair value less cost of disposal.
The Group uses the value-in-use method in order to assess the recoverable amount of the CGUs to which the indefinite
life intangible assets have been allocated. If the recoverable amount of the CGU is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the
other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss recognised for goodwill is not reversed in a subsequent period.
101
Critical Estimates and Judgements: Impairment of goodwill
Goodwill is not subject to amortisation and is assessed for impairment at least on an annual basis, or whenever an
indication of potential impairment arises. During the financial year, management identified the impacts arising from
the COVID-19 pandemic as an indicator of potential impairment.
Management judgement is required to determine the recoverable amounts of the Group’s CGUs, which have been
determined using a value-in-use calculation. The following key assumptions have been used in determining the
recoverable amount of the CGUs with allocated goodwill:
l Cash flow projections – cash flow projections are based on five-year board approved forecasts. These includes
expected customer growth rates, average revenue per user, product and pricing mix changes, direct costs to
deliver telecommunication services, forecast employee headcount and wage inflation, marketing costs and other
overheads, capital expenditure and spectrum. These assumptions are determined based both on an extrapolation
of historical performance and future company plans.
l Discount rate – a pre-tax discount rate has been used to discount the projected cash flows of the CGUs and is
based on the Group’s weighted average cost of capital adjusted to reflect an estimate of specific risks assumed in
the cash flow projections.
l Terminal value growth rate – a long term grow rate is applied to extrapolate a CGU’s cash flows beyond the
five-year forecast period. This growth rate is based on expected long-term performance in the market.
Discount rate
Terminal growth rate
2020
2019
CONSUMER
CORPORATE
TPG TELECOM
(THEN VHA)
9.27%
2.5%
9.14%
2.5%
9.69%
2.0%
Sensitivity analysis on all of the key assumptions employed in the value-in-use calculations has been performed.
From this, management has concluded that a reasonable possible change in EBITDA could cause the carrying
amount of each CGU to exceed the recoverable amount. Cumulative Annual Growth Rate (‘CAGR’) of EBITDA would
need to reduce by 1.2% in the Consumer CGU and 1.5% in the Corporate CGU for the estimated recoverable amount
to be equal to the carrying amount (2019: 1.0% in the TPG Telecom (then VHA) CGU).
Due to the interrelated nature of the assumptions, movements in any one variable can have an indirect impact on
others and individual variables rarely change in isolation. Additionally, management can be expected to respond
to movements, to mitigate downsides and take advantage of upsides, as circumstances allow. Consequently, it is
impracticable to estimate the indirect impact that a change in one assumption has on other variables and, hence, to
estimate the likelihood, or extent, of impairments, or reversals of impairments, under different sets of assumptions in
subsequent reporting periods.
Full-Year Financial Results for the year ended 31 December 2020102
Notes to the Consolidated Financial Statements continued
Note 17. Trade and other payables
Trade creditors and accruals
Employee benefits related payables
Other creditors
Payables to related parties
Trade creditors
2020
$m
848
45
10
24
2019
$m
702
35
260
38
927
1,035
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period
and which are unpaid. The amounts are unsecured and are usually paid or payable within 30 to 180 days of recognition.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-
term nature.
Employee benefits – Wages and salaries
Liabilities for wages and salaries, including non-monetary benefits, that are expected to be settled wholly within
12 months after the end of the reporting period in which the employees render the related service are recognised in
other creditors in respect of employees’ services up to the reporting date and are measured at the amounts expected
to be paid when the liabilities are settled. Liabilities for sick leave are recognised when the leave is taken and measured
at the rates paid or payable.
Employee benefits – Superannuation
The Group pays contributions to defined contribution superannuation plans on a mandatory, contractual or voluntary
basis. The Group has no further payment obligations once the contributions have been paid. The contributions are
recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future payments is available.
Employee benefits - Bonus
A liability for employee benefits in the form of a bonus plan is recognised in other creditors when there is no realistic
alternative but to settle the liability and at least one of the following conditions is met:
l there are formal terms in the plan for determining the amount of the benefit;
l the amounts to be paid are determined before the time of completion of the financial statements; or
l past practice gives clear evidence of the amount of the obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be
paid when they are settled.
The Group accrues for long-term incentives based on a number of eligible employees and expected hurdle rates being met.
Employee benefits - Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or
when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; and
(b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 and involves the payment
of termination benefits.
103
Note 18. Borrowings
Borrowings are initially recognised at fair value. Borrowings are subsequently measured at amortised cost. Any difference
between the proceeds and the redemption amount is recognised in the Consolidated Income Statement over the period
of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities, which are not incremental costs relating to the drawdown of the
facilities, are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will
be drawn down, otherwise recognised as prepayments and amortised on a straight-line basis over the term of the facility.
Current
Bank loans (unsecured)
Shareholder loans
Guarantee fee payable to related parties
Other
Non-current
Bank loans (unsecured)
Guarantee fee payable to related parties
Other
2020
$m
–
–
–
–
–
2019
$m
4,983
152
118
2
5,255
4,330
1,700
–
–
41
2
4,330
1,743
Repayment of pre-merger and acquired loans
The Group’s AUD1.7 billion loan, guaranteed by entities controlled by the legacy shareholders for which the Group paid a
guarantee fee, was repaid on 2 July 2020 as part of the pre-merger completion debt restructuring steps.
The Group’s USD3.5 billion syndicated loan facility guaranteed by entities controlled by the legacy shareholders for
which the Group paid a guarantee fee, was assumed by certain shareholders on 9 July 2020 as part of the pre-merger
completion debt restructuring steps.
As part of the merger, the Group acquired TPG Corporation’s debt facilities of $2,389 million (including a Singapore
dollar denominated facility of SGD100 million translated to AUD using the 30 June 2020 spot rate) of which
$2,047 million was drawn down as at 30 June 2020. These bank loans were subsequently repaid on 14 July 2020.
The fair value of the loans approximate their carrying amounts as the interest payable is either close to current market
rates or have recently been tested in the market.
Available facilities
At 31 December 2020, the Group has loan facilities of $5,250 million and a committed overdraft facility of $35 million.
Total amount of undrawn borrowing facilities as at 31 December 2020 was $955 million (2019: $1,348 million).
Loan establishment fees of $27 million relating to the new loan facilities have been capitalised in prepayments and
amortised over the loan period.
The Group’s bank loan facilities contain undertakings to comply with financial covenants. These require that the Group
operates within certain financial ratios. The financial covenants that the Group is subject to are Leverage and Interest
Coverage. Additionally, the Group is required to ensure that that the Total Assets and EBITDA of the guarantors meet
minimum threshold amounts of Total Assets and consolidated EBITDA of the Group.
There were no breaches of financial covenants during the year ended 31 December 2020.
Full-Year Financial Results for the year ended 31 December 2020104
Notes to the Consolidated Financial Statements continued
Note 19. Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events;
it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value
of management’s best estimate of the expenditure required to settle the present obligation at the reporting date.
The discount rate used to determine the present value reflects current market assessments of the time value of
money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised
as interest expense.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is
considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under
the contract exceed the economic benefits expected to be received under it.
Make good provisions
A provision has been made for the present value of anticipated future costs of restoration of leased premises.
The provision includes future cost estimates associated with removing any leasehold improvements. The costs have
been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of the
lease or the useful life of the assets.
Decommissioning costs
The Group records a provision for decommissioning costs on its network and IT. Decommissioning costs are provided
at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part of
the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and adjusted as
appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the
cost of the asset.
Annual leave employee benefit obligations
Liabilities for annual leave that are expected to be settled wholly within 12 months after the end of the reporting period
in which the employees render the related service are recognised in provision for employee benefits in respect of
employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities
are settled.
Long service leave and other long-term employee benefit obligations
The Group has liabilities for long service leave that are not expected to be settled wholly within 12 months after the
end of the period in which the employees render the related service. The liability for long service leave is recognised
in the provision for employee benefits and measured as the present value of expected future payments to be made in
respect of services provided by employees up to the reporting date. Consideration is given to expected future wage
and salary levels, experience of employee departures and periods of service. Expected future payments are discounted
using market yields at the reporting date on national corporate bonds with terms to maturity and currency that match,
as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the
consolidated statement of financial position if the entity does not have an unconditional right to defer settlement for
at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
105
2020
$m
2019
$m
51
19
14
84
11
53
–
64
23
9
5
37
5
17
–
22
DECOMMISSIONING
AND MAKE GOOD
$m
OTHER
PROVISIONS
$m
TOTAL
$m
26
41
8
(3)
72
5
12
–
(3)
14
31
53
8
(6)
86
2020
$m
2019
$m
21
60
81
6
23
72
95
12
Current
Employee benefits
Decommissioning and make good
Other provisions
Non-current
Employee benefits
Decommissioning
Other provisions
Movement in provisions (excluding employee benefits)
Balance at 1 January 2020
Acquired from business combination
Additional amounts expensed during the year
Amounts used during the year
Balance at 31 December 2020
Note 20. Other liabilities
Current
Government grants
Other payables
Non-current
Other payables
Full-Year Financial Results for the year ended 31 December 2020106
Notes to the Consolidated Financial Statements continued
Note 21. Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds. Equity instruments issued by the Company are classified
according to the substance of the contractual arrangements entered into and the definitions of an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting
all of its liabilities. Interest and dividends are classified as expenses or as distributions of profit consistent with the
classification of related debt or equity instruments in the Consolidated Statement of Financial Position.
Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the company in proportion
to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present
at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary
shares have no par value and the Consolidated Entity does not have a limited amount of authorised capital. All shares
rank equally with regard to the Company’s residual assets.
2020
SHARES
2019
SHARES
2020
$m
2019
$m
Ordinary shares (fully paid)
Balance at 1 January
Share consolidation on debt restructure
1,100,096,986
1,100,096,986
(685,911,834)
–
414,185,152
1,100,096,986
Shares issued on the Company’s debt restructure
Shares issued on acquisition of TPG Corporation
517,345,024
927,811,493
–
–
6,047
–
6,047
4,475
7,877
6,047
–
6,047
–
–
Balance at 31 December
1,859,341,669 1,100,096,986
18,399
6,047
Share consolidation and shares issued on the Company’s debt restructure
On 9 July 2020, the Company performed a share consolidation and issued shares to the Company’s pre-merger
shareholders, entities in the CKHH and Vodafone Group, so that these shareholders’ ownership in the Company
represented 50.1% of the Company’s total issued shares on merger completion on 13 July 2020.
The value of the shares issued was $4,475 million, which equated to the Company’s debt transferred out of the Group
and assumed by the Company’s pre-merger shareholders. Refer to Note 18 for further details on the debt restructure.
Shares issued on acquisition of TPG Corporation
On 13 July 2020, notwithstanding an effective date of 26 June 2020 for accounting purposes, the Company legally
acquired TPG Corporation through the issuance of shares. One share in the Company was issued to TPG Corporation’s
pre-merger shareholders for every one share held in TPG Corporation. The shares issued to TPG Corporation’s pre-
merger shareholders represent 49.9% of the Company’s total issued shares on merger completion.
The value of the shares issued was $7,877 million. Refer to Note 12 for further details.
107
Note 22. Reserves
Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of hedging
instruments used in cash flow hedges, pending subsequent recognition in the income statement as the hedged cash
flows or items affecting profit or loss.
Foreign currency translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the presentation currency of the reporting entity.
Common control reserve
The common control reserve comprise differences arising from transfers of assets and liabilities in exchange of equity
interests among entities with shareholders that had jointly controlled the Company during the year.
Cash flow hedge reserve
Foreign currency translation reserve
Common control reserve
Movement in reserves
Balance at 1 January
Change in value of cash flow hedges
Change in value foreign currency translation reserve
Change in value of common control reserve
Balance at 31 December
Note 23. Dividends
No dividends were declared or paid during the year (2019: nil).
Dividend franking account
30 per cent franking credits available to shareholders of the Company
for subsequent financial years
2020
$m
2019
$m
(1)
(1)
3
1
(1)
–
(1)
3
1
(1)
–
–
(1)
–
(1)
–
–
(1)
2020
$m
2019
$m
540
–
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
l franking credits that will arise from the payment of the current tax liabilities; and
l franking credits transferred in on business combinations.
Full-Year Financial Results for the year ended 31 December 2020108
Notes to the Consolidated Financial Statements continued
Note 24. Related party transactions
(a) Parent entities
The Group was jointly controlled by the following immediate parent entities until 26 June 2020 (for accounting purposes).
NAME OF ENTITY
RELATIONSHIP WITH THE COMPANY
COUNTRY OF INCORPORATION
Hutchison 3G Australia
Holdings Pty Limited
Immediate Australian jointly controlling
parent entity
Hutchison Telecommunications
(Australia) Ltd
Ultimate Australian jointly controlling
parent entity
Australia
Australia
Vodafone Oceania Limited
Immediate jointly controlling parent entity United Kingdom
%
50
50
50
The Group was jointly controlled by the following ultimate parent entities until 26 June 2020 (for accounting purposes).
NAME OF ENTITY
RELATIONSHIP WITH THE COMPANY
COUNTRY OF INCORPORATION
CK Hutchison Holdings Ltd
Ultimate jointly controlling parent entity
Cayman Islands
Vodafone Group Plc
Ultimate jointly controlling parent entity
United Kingdom
%
43.93
50
Subsequent to the merger with TPG Corporation, TPG Telecom Limited is the parent entity.
(b) Interests in other entities
Interests in other entities are set out in Note 13.
(c) Key management personnel
The aggregate compensation made to directors and other members of the key management personnel of the Group is
set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
2020
$’000
9,466
208
2,695
1,366
2019
$’000
9,305
209
3,291
–
13,735
12,805
In July 2020, a related party of the Group was paid accrued leave entitlements and a twelve week redundancy payment
upon termination of their employment with TPG Corporation. A liability for this payment was included within TPG
Corporation’s acquisition date liabilities.
(d) Transactions with related parties
Purchases of goods and services
Purchases of equipment
Service fee paid/payable
Roaming fee paid/payable
IOT fee paid/payable
Provision of services
Service fee received/receivable
Roaming income received/receivable
IOT income received/receivable
Other transactions
Pre-acquisition dividends paid
Office rental
Outsourced services
Guarantee fee paid/payable
Interest expense paid/payable
109
2020
$’000
2019
$’000
13,633
50,106
3,052
1,849
3,657
2,446
1,393
280,407
855
–
24,105
44,373
14,692
–
2,124
5,900
1,065
–
–
–
82,026
152,366
1,909
10,800
All transactions were made on normal commercial terms and conditions and at market rates.
(e) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Current receivables
Hutchison Telecommunications (Australia) Limited (joint parent entity until 26 June 2020)
Mobile JV Pty Limited (joint venture until 26 June 2020)
Other related parties
Swap interest receivable with other related parties
Current payables
Guarantee fees payable
Other related parties
Interest payable
Non-current payables
Guarantee fees payable
2020
$’000
2019
$’000
920
–
489
–
1,409
298
61
300
4,094
4,753
–
118,542
23,755
–
37,739
386
23,755
156,667
–
41,028
Full-Year Financial Results for the year ended 31 December 2020110
Notes to the Consolidated Financial Statements continued
Note 24. Related party transactions continued
(f) Loans from related parties
Loans from entities within group of jointly controlled parent until 26 June 2020
Balance at 1 January
Loans advanced
Loans repaid
Balance at 31 December
(g) Derivative transactions with related parties
Swaps entered with related entities of CK Hutchison Holdings Limited
Current assets
Non-current assets
Net interest revenue
Swaps entered with related entities of Vodafone Group Plc
Current assets
Non-current assets
Net interest revenue
2020
$’000
2019
$’000
152,000
321,529
–
–
(152,000)
(169,529)
–
152,000
2020
$’000
2019
$’000
–
–
67,714
–
10,089
18,608
–
–
64,707
–
10,097
18,691
Up until 9 July 2020, the Group had a US$3.5 billion syndicated loan facility with a syndicate of lenders. The facility was
based on the 3 month US LIBOR plus a margin. In order to protect against exchange rate movements, the Group had in
place cross currency swaps to coincide with the maturity of the loan. The swaps covered 100% of the outstanding loan
balance and had a fixed exchange rate and effectively swapped US Dollar debt for Australian Dollar debt. The swaps
were entered into with related parties associated with the jointly controlling parent entities. On 9 July 2020, the Group’s
US$3.5 billion syndicated loan facility and the associated cross currency swaps were assumed by certain shareholders
as part of the pre-merger completion debt restructuring steps.
Note 25. Commitments
(a) Capital commitments
Commitments for the acquisition of property, plant and equipment contracted for at the reporting date but not
recognised as liabilities:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2020
$m
346
20
–
366
2019
$m
361
18
–
379
111
(b) Other commitments
Commitments for payment of information technology, network support services, and sponsorships under contracts in
existence at the reporting date but not recognised as liabilities:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2020
$m
108
96
72
276
2019
$m
86
83
11
180
Note 26. Parent entity financial information
Investments in subsidiaries by the Company are accounted for at cost. The financial information for the Company has
been prepared on the same basis as the consolidated financial statements.
The parent entity financial information for the year ended 31 December 2020 has been prepared on the basis that
the transactions and balances of the Group (other than those of Vodafone Hutchison Finance Pty Limited, Vodafone
Hutchison Receivables Pty Limited, and Vodafone Foundation Australia Pty Limited) are all recorded in the Parent
Entity of the Group, being TPG Telecom Limited. Comparatives have been prepared in the same manner to enhance
comparability.
(a) Summary financial information
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Contributed equity
Cash flow hedge reserve
Prior year accumulated losses
Current year retained earnings
Total equity/(deficiency in equity)
Financial performance
Profit/(loss) for the year
Total comprehensive profit/(loss) for the year
2020
$m
2019
$m
3,301
17,253
20,554
2,798
5,348
8,146
1,282
9,253
10,535
10,089
1,580
11,669
12,408
(1,134)
18,399
6,047
2
(7,180)
1,187
(1)
(7,180)
–
12,408
(1,134)
1,187
1,183
(284)
(285)
Full-Year Financial Results for the year ended 31 December 2020112
Notes to the Consolidated Financial Statements continued
Note 26. Parent entity financial information continued
(b) Guarantees entered into by the parent entity
Secured
Unsecured
(c) Capital commitments
2020
$m
–
6
6
Commitments for the acquisition of property, plant and equipment contracted for at the reporting date but not
recognised as liabilities:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
(d) Other commitments
2020
$m
272
20
–
292
2019
$m
38
15
53
2019
$m
361
17
–
378
Commitments for payment of information technology, network support services, and sponsorships under contracts in
existence at the reporting date but not recognised as liabilities:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2020
$m
103
88
67
258
2019
$m
86
83
11
180
113
Note 27. Deed of cross guarantee
The parties to the deed of cross guarantee are those as disclosed in Note 13. Each entity that is a party to the deed of
cross guarantee has guaranteed the debts of the other parties. By entering into the deed, each of the wholly-owned
entities that would otherwise be subject to the requirement to prepare a financial report and director’s report have been
relieved from that requirement under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
Set out below is the summarised consolidated statement of profit or loss and other comprehensive income for the
entities that are parties to the deed of cross guarantee.
Revenue from contracts with customers
Other income
Cost of provision of telecommunication services
Cost of handsets sold
Employee benefits expense
Other operating expenses
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Results from operating activities
Finance income
Finance expenses
Net financing costs
Loss before income tax
Income tax benefit/(expense)
Profit/(loss) for the year
Items that may subsequently be reclassified to the income statement, net of tax:
Foreign exchange translation differences
Net gain/(loss) on cash flow hedges taken to equity
Items that will not subsequently be reclassified to the income statement, net of tax:
Net change in fair value of asses measured through other comprehensive income
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income/(loss) for the year
2020
$m
4,330
11
(1,374)
(855)
(299)
(409)
2019
$m
3,513
10
(696)
(1,101)
(232)
(322)
1,404
1,172
(1,183)
(1,021)
221
3
(292)
(289)
(68)
821
753
–
3
–
3
151
7
(442)
(435)
(284)
–
(284)
–
(1)
–
(1)
756
(285)
Full-Year Financial Results for the year ended 31 December 2020
114
Notes to the Consolidated Financial Statements continued
Note 27. Deed of cross guarantee continued
Set out below is the consolidated statement of financial position for the deed of cross guarantee.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax assets
Prepayments
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Lease liabilities
Provisions
Derivative financial instruments
Other current liabilities
Total current liabilities
Non-current liabilities
Contract liabilities
Borrowings
Lease liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity/(deficiency in equity)
2020
$m
2019
$m
117
614
51
–
74
856
109
3,195
1,012
13,359
264
28
17,967
18,823
924
271
–
92
82
1
80
734
391
103
–
55
1,283
77
1,865
1,454
3,929
–
–
7,325
8,608
1,032
122
6,865
84
25
1
93
1,450
8,222
25
4,330
1,051
64
6
5,476
6,926
11,897
18,399
2
(6,504)
11,897
–
2
1,544
22
12
1,580
9,802
(1,194)
6,047
(1)
(7,240)
(1,194)
115
Note 28. Financial risk management
The Group’s activities are exposed to a variety of financial risks which include market risk (including interest rate risk and
foreign currency risk), credit risk and liquidity risk. The Group’s overall risk management seeks to minimise the potential
adverse effects of these risks on the financial performance of the Group.
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and
processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are
included throughout this financial report.
The Board of directors has overall responsibility for the establishment and oversight of the risk management framework.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and in the Group’s activities. The Group aims to develop a disciplined
and constructive control environment in which all employees understand their roles and obligations.
The Group’s Audit & Risk Committee oversees how management monitors compliance with the Group’s risk management
policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by
the Group.
(a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising return.
(i) Interest rate risk
The Group has cash balances placed with reputable banks and financial institutions which generate interest income
for the Group. The Group manages its interest rate risks on its interest income by placing the cash balances on varying
maturities and interest rate terms. Based on the closing cash balance, an increase in interest rates of 50 basis points on
the unhedged position (mostly cash and cash equivalents) will generate a profit of $0.6 million to the profit or loss, a
similar decrease in interest rates will generate a $0.6 million loss to the profit or loss.
The Group’s borrowings include bank borrowings, shareholder loans and leases. The borrowings expose the Group to
interest rate risk. As at 31 December 2020, approximately 21% (2019: 21%) of the Group’s borrowings were at fixed rates
of interest (0% of borrowings were at fixed rates, when excluding leases under AASB 16). As at 31 December 2020,
assuming that the market interest rate is 50 basis points higher or lower and with no change in other variables, the
annualised interest expense on borrowings would be higher or lower by $21.7 million (2019: $33.5 million).
As at the end of the reporting period, the Group had the following variable rate borrowings and interest rate swap
contracts outstanding:
2020
2019
WEIGHTED
AVERAGE
INTEREST
RATE
%
PERCENTAGE
OF TOTAL
LOANS
%
WEIGHTED
AVERAGE
INTEREST
RATE
%
PERCENTAGE
OF TOTAL
LOANS
%
BALANCE
$m
BALANCE
$m
Bank overdrafts and bank loans
2.08
4,330
100
Cross currency swaps
Cross currency swaps
(notional principal amount)
Net exposure to
interest rate risk
4,330
100
2.54
2.72
2.73
6,835
(4,983)
4,844
6,696
100
100
Full-Year Financial Results for the year ended 31 December 2020116
Notes to the Consolidated Financial Statements continued
Note 28. Financial risk management continued
(ii) Foreign currency risk
The Group is exposed to currency risk on revenues, expenses, receivables and payables that are denominated in a
currency other than its functional currency, the Australian dollar (AUD). The Group is mainly exposed to the United
States Dollar (USD), Euro (EUR), Indian Rupee (INR), with minor exposures to other currencies. The following table
details the Group’s sensitivity to movements in the Australian dollar against relevant foreign currencies. The percentages
disclosed below represent changes in spot foreign exchange rates (i.e. forward exchange points and discount factors
have been kept constant). The sensitivity analysis includes only outstanding foreign currency denominated monetary
items and adjusts their translation at the period end for a given percentage change in foreign exchange rates. A positive
number indicates a before-tax increase in profit and equity and a negative number indicates a before-tax decrease in
profit and equity.
USD impact
10%
(10%)
EUR impact
10%
(10%)
INR impacts
10%
(10%)
PROFIT/(LOSS)1
EQUITY2
2020
$m
2019
$m
2020
$m
2019
$m
1
(1)
–
–
–
–
1
(1)
1
(1)
–
–
(2)
3
–
–
(2)
3
–
–
(1)
(1)
(3)
4
1. Profit/(loss): this is mainly as a result of the changes in the value of forward foreign exchange contracts not designated in a hedge relationship, foreign
currency investments, receivables and payables.
2. Equity: this is as a result of the changes in the value of forward foreign exchange contracts designated as cash flow hedges.
Amounts recognised in the Consolidated Income Statement and Consolidated Statement
of Comprehensive Income
During the year, the following foreign exchange related amounts were recognised in consolidated income statement and
consolidated statement of comprehensive income:
Profit or loss
Net (loss)/gain on foreign currency derivatives
Exchange gain/(loss) on foreign currency borrowings
Other foreign exchange gain
Other comprehensive income
Movement in reserves
2020
$m
2019
$m
(97)
97
1
1
13
(13)
–
–
(1)
(1)
117
(iii) Equity price risk
The Group is exposed to equity price risk because of its investments in available-for-sale equity securities. Material
investments are managed on an individual basis with the goal of maximising returns.
(b) Credit risk
Credit risk is managed on an entity basis. Credit risk arises from cash and cash equivalents, deposits with banks and
financial institutions, as well as credit exposures to related parties. The Group has adopted a policy of only dealing with
creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.
(i) Impairment of financial assets (trade receivables)
The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all receivables. To measure the expected credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due.
1-30
DAYS
PAST DUE
31 TO 60
DAYS
PAST DUE
61 TO 90
DAYS
PAST DUE
MORE THAN
91 DAYS
PAST DUE
TOTAL
CURRENT
At 31 December 2020
Expected loss rate
Gross trade receivables
Loss allowance
At 31 December 2019
Expected loss rate
Gross trade receivables
Loss allowance
%
$m
$m
%
$m
$m
9.5
169
16
1.7
120
2
6.7
45
3
5.3
38
2
25.0
8
2
14.3
14
2
25.0
4
1
25.0
4
1
75.0
20
15
25.0
16
4
246
37
192
11
The table above covers the expected credit loss rate of trade receivables and other debtors. Collectability of receivables
are reviewed on an ongoing basis. The Group applies the AASB 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk characteristics and the days past due.
Geographically, the Group is subject to a concentration of credit risk as predominantly all of its revenue is generated in
Australia.
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Prudent liquidity
risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an
adequate amount of committed credit facilities and the support from related parties.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. Treasury aims at maintaining flexibility in funding by keeping committed
credit lines available with a variety of counterparties. Surplus funds are generally only invested in instruments that are
tradeable in highly liquid markets.
Full-Year Financial Results for the year ended 31 December 2020118
Notes to the Consolidated Financial Statements continued
Note 28. Financial risk management continued
Contractual maturities of financial liabilities
The contractual maturities of the Group’s financial liabilities were as follows:
FINANCIAL
LIABILITIES
At 31 December 2020
Trade and other
payables
Borrowings
Lease liabilities
At 31 December 2019
Trade and other
payables
Borrowings
Lease liabilities
Cross currency
interest rate swaps
LESS
THAN 6
MONTHS
$m
6-12
MONTHS
$m
BETWEEN
1-2 YEARS
$m
BETWEEN
2-5 YEARS
$m
OVER
5 YEARS
$m
TOTAL
CONTRACTUAL
CASH FLOWS
$m
CARRYING
AMOUNT OF
LIABILITIES
$m
927
58
88
1,073
1,035
243
112
1,390
–
49
86
135
–
5,303
105
5,408
(16)
(18)
1,374
5,390
–
104
165
269
–
35
204
239
–
239
–
4,465
429
4,894
–
1,872
580
2,452
–
–
904
904
–
–
1,455
1,455
–
–
2,452
1,455
927
4,676
1,672
7,275
1,035
7,453
2,456
10,944
(34)
10,910
927
4,330
1,143
6,400
1,035
6,998
1,628
9,661
130
9,791
(d) Fair value measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction in the principal market at the measurement date under current market conditions. Fair value is an exit price
regardless of whether that price is directly observable or estimated using another valuation technique.
Specific valuation techniques used to value financial instruments include:
l the use of quoted market prices or dealer quotes for similar instruments;
l the fair value of cross currency swaps is calculated as present value of estimated future cash flows based on
observable yield curves;
l the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet
date; and
l the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
119
The following table summarises information on how the fair values of financial assets and financial liabilities measured at
fair value are determined.
DESCRIPTION
UNOBSERVABLE INPUTS
Cross currency swaps
Discounted cash flow. Future cash flows are estimated based on market forward interest rates
as at the end of the reporting period and the contract interest rates, discounted at a rate that
reflects the credit risk of the respective counterparties.
Forward foreign exchange
contracts
Discounted cash flow. Future cash flows are estimated based on forward exchange rates (from
observable forward exchange rates at the end of the reporting period) and contract forward
rates, discounted by the observable yield curves of the respective currency.
Handset and accessories
receivables
Discounted cash flow. Future cash flows are estimated based on implicit interest rate on handset
receivable sale arrangements to external parties.
(e) Fair value hierarchy
To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial
instruments into the three levels prescribed under the accounting standards.
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivative, and trading
and available-for-sale securities) is based on quoted (unadjusted) market prices at the end of the reporting
period. The quoted market price used for financial assets held by the Group is the current bid price. These
instruments are included in Level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
Level 3:
If one or more of the significant inputs is not based on observable market data, the instrument is included in
Level 3. This is the case for unlisted equity securities.
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at
31 December 2020 and 31 December 2019 on a recurring basis:
LEVEL 1
$m
LEVEL 2
$m
LEVEL 3
$m
TOTAL
$m
At 31 December 2020
Financial assets
Handset and accessories receivables
Financial liabilities
Forward foreign exchange contracts
At 31 December 2019
Financial assets
Handset and accessories receivables
Foreign currency swaps
Financial liabilities
Forward foreign exchange contracts
–
–
–
–
–
–
–
1
–
130
130
153
153
–
1
115
–
115
115
130
245
1
–
1
Full-Year Financial Results for the year ended 31 December 2020120
Notes to the Consolidated Financial Statements continued
Note 28. Financial risk management continued
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the
reporting period. There were no transfers between levels during the period.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 31
December 2020 (2019: nil).
Valuation techniques used to determine fair values
The fair value of foreign cross currency swap contract derivatives is determined using Bloomberg valuations at the
balance sheet date.
Foreign currency forward contracts are measured based on observable spot exchange rates, the yield curves of the
respective currencies as well as the currency basis spreads between the respective currencies.
The fair value of handset receivables is determined using the implicit interest rate on handset receivable sale
arrangements to external parties at the balance date.
(f) Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to
sustain the future development of the business. The Board monitors return on capital, which the Group defines as profit
from operating activities divided by total shareholders’ equity. The Board also determines the level of dividends to be
paid to shareholders.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings, and the advantages and security afforded by a sound capital position.
From time to time, the Group may purchase its own shares on market for the purpose of issuing shares under employee
share plans. The Group does not currently have a defined share buy-back plan.
There were no changes to the Group’s capital management during the year.
The Group’s net debt to equity ratio at the reporting date was as follows:
Cash and cash equivalents
Borrowings (current)
Borrowings (non-current)
Lease liabilities (current)
Lease liabilities (non-current)
Derivative financial instruments
Net debt
Total equity
Net debt to equity ratio at 31 December
2020
$m
120
–
(4,330)
(92)
2019
$m
734
(5,255)
(1,743)
(84)
(1,051)
(1,544)
(1)
(5,354)
11,892
0.45
129
(7,763)
(1,203)
(6.45)
121
Note 29. Auditor’s remuneration
The Group’s external auditor is PricewaterhouseCoopers (PwC). In addition to the audit and review of the Group’s
financial reports, PwC provides other services throughout the year. This note shows the total fees to external auditors
split between audit, audit related and non-audit services.
Audit and other assurance services
Audit and review of financial statements
Other statutory assurance services
Other assurance services
2020
$’000
2019
$’000
1,819
1,106
25
128
25
64
1,972
1,195
Note 30. Events occurring after the reporting period
COVID-19 Pandemic
Since the reporting date, containment policies by the Australian Government and governments around the world remain
in force to prevent the spread of COVID-19. The level of restrictions and measures to limit movement into and out of
Australia, and also domestically, is ongoing, and continues to impact inbound related connections, visitor revenue
and international roaming revenues. While there is prevailing uncertainty of the extent and duration of the COVID-19
pandemic, it is reasonably likely that the pandemic will continue to have an impact on the Group’s operations and results
in future periods.
Renegotiation of network site access arrangements
On 15 January 2021, the Company entered into an agreement with Axicom, a supplier of network site access. Under the
terms of the agreement, the lease term of existing network sites has been extended for an initial period of 19 years.
Network site access arrangements have been recognised as leases under AASB 16. At 31 December 2020, the right-of-
use assets and lease liabilities reflect the enforceable period under the existing agreement. The signing of the agreement
will give rise to an additional $267 million of lease liabilities and right-of-use assets.
Disposal of Tech2
On 1 February 2021, the Company completed the disposal of its 60% investment in Tech2. As the investment was held at
fair value at 31 December 2020, there were no further accounting impacts that arose on completion.
Dividends declared
The Board of directors have declared a fully franked final FY20 dividend of 7.5 cents per share on 24 February 2021.
As the final dividend was not declared or resolved to be paid by the Board of directors as at 31 December 2020, the
dividend has not been provided for in the Consolidated Statement of Financial Position. The dividend has a record date
of 17 March 2021 and will be paid on 14 April 2021. All dividends declared or paid were fully franked at the tax rate
of 30%. The ability to utilise the franking credits is dependent upon the ability of the Company to pay dividends. The
impact on the dividend franking account of dividends proposed after the balance sheet date but not yet recognised as a
liability is to reduce it by $60 million (2019: nil).
There has been no other matter or circumstance that has arisen after the reporting date that has significantly affected,
or may significantly affect:
(i) the operations of the Company and of the Group in future financial years, or
(ii) the results of those operations in future financial years, or
(iii) the state of affairs of the Company and of the Group in future financial years.
Full-Year Financial Results for the year ended 31 December 2020122
Directors’ Declaration
In the Directors’ opinion:
(a) the financial statements and notes are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulation 2001 and other mandatory professional
reporting requirements, and
(ii) giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for
the financial year ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable, and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed
group identified in Note 13 will be able to meet any obligations or liabilities to which they are, or may become,
subject by virtue of the deed of cross guarantee described in Notes 13 and 27.
Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer as required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
David Teoh
Director
25 February 2021
Iñaki Berroeta
Director
25 February 2021
Independent Auditor’s Report
123
Independent auditor’s report
To the members of TPG Telecom Limited (formerly named Vodafone Hutchison Australia Limited)
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of TPG Telecom Limited (formerly named Vodafone Hutchison
Australia Limited) (the Company) and its controlled entities (together the Group) is in accordance with
the Corporations Act 2001, including:
a) giving a true and fair view of the Group's financial position as at 31 December 2020 and of its
financial performance for the year then ended
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 31 December 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated income statement for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, GPO BOX 2650 Sydney NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Full-Year Financial Results for the year ended 31 December 2020
124
Independent Auditor’s Report continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
Materiality
Audit scope
Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
The Group operates across two operating
segments, being Consumer and Corporate, with its
head office functions based in Sydney, Australia.
We tailored the scope of our audit to ensure that
we performed enough work to be able to give an
opinion on the financial report as a whole, taking
into account the management structure of the
Group, its accounting processes and controls and
its industry in which it operates.
For the purpose of our audit we used overall Group
materiality of $34m, which represents
approximately 2.5% of the Group’s earnings before
interest, tax, depreciation and amortisation
(EBITDA).
We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
We chose Group’s earnings before interest, tax,
depreciation and amortisation because, in our
view, it is the benchmark against which the
performance of the Group is most commonly
measured.
We utilised a 2.5% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
125
Key audit matter
How our audit addressed the key audit matter
Revenue from contracts with customers
(Refer to note 4) $4,350m
Revenue from contracts with customers was a key
audit matter given the:
magnitude of the balance
number of different revenue streams and
types of variable consideration given the
diversity of products and services
complexity of the contractual
arrangements in telecommunication
services
We have also focussed on revenue recognition as
the Group uses complex manual calculations,
dependent on information from multiple billing
systems, to determine the timing of revenue
recognition and the value of contract liabilities for
the relevant financial period for each revenue
stream.
We assessed the Group’s accounting policy in light of the
requirements of Australian Accounting Standards and
developed an understanding of the key terms of the
arrangements with customers and performance
obligations.
Our procedures included, amongst others:
tested on a sample basis whether revenue had
been recorded at the correct amount and in the
correct period, in accordance with the Group’s
revenue recognition policy. This included
assessing whether:
o
o
o
o
evidence of an underlying arrangement
with the customer existed
appropriate performance obligations and
consideration had been identified
amounts allocated to the performance
obligations were made with reference to
their standalone selling prices, where
relevant
the timing of revenue recognition had
been appropriately considered for each
revenue stream in accordance with its
performance obligations
considered and assessed the adequacy of the
Group’s disclosures of revenue from contracts
with customers in accordance with Australian
Accounting Standards.
Business combinations – acquisition of TPG
Corporation
(Refer to note 12) $7,671m
During the year the Company merged with TPG
Corporation which became effective on 26 June
2020. The merger was implemented through a
Scheme of Arrangement under which the company
acquired all of the shares in TPG Corporation in
return for issuing shares in the company to TPG
Corporation shareholders. The Scheme was
approved by the Supreme Court of New South
We performed the following audit procedures, amongst
others:
read the merger agreement between the Company
and TPG Corporation to obtain an understanding
of the transaction and the business acquired
read relevant minutes of the Board of Directors,
legal correspondence and other documents
Full-Year Financial Results for the year ended 31 December 2020
126
Independent Auditor’s Report continued
Key audit matter
How our audit addressed the key audit matter
Wales on 26 June 2020 being the deemed date of
effective control. For accounting purposes the
company acquired TPG Corporation under AASB 3
Business Combinations.
The accounting for the acquisition was a key audit
matter because it was a significant transaction to
the Group. In addition, the Group made complex
judgements when accounting for the acquisition,
including:
●
●
identifying the effective date of acquisition
which is the deemed date of effective control
estimating the purchase consideration,
particularly in respect of determining the fair
value of shares issued and settlement of pre-
existing relationships
● determining if the pre-existing contractual
relationships reflected market value at the
acquisition date so that no gain or loss was
recognised
●
identifying all assets and liabilities of the newly
acquired business and estimating the fair value
of each asset and liability for initial recognition
by the Group, particularly the Customer
Contracts and Relationships and Brands, which
included engaging a valuation expert to assist
in the assignment of provisional fair values at
the acquisition date.
As TPG Corporation was only acquired on 26 June
2020 and given the significance of the acquisition
the accounting for business combinations is
provisional pending the finalisation of fair vales of
the assets and liabilities acquired.
evaluating the transaction
evaluated the Group’s accounting against the
requirements of accounting standards
assessed the appropriateness of the share price of
TPG Telecom on 30 June 2020 as the most
reliable measure of the fair value of the scheme
consideration at the acquisition date
obtained an understanding of the pre-existing
relationships and inspected contracts to evaluate
the accounting treatment of the settlement of pre-
existing relationships
assessed, with the assistance of our valuation
experts, the work performed by the Group’s
valuation experts over the provisional purchase
price allocation to the provisional valuation of
intangibles assets at 26 June 2020 and the assets
and liabilities acquired by:
o
o
o
evaluating the competence and
capability of management’s expert
assessing the appropriateness of the
methodology adopted by the Group and
its appointed expert for calculating fair
value
considering key valuation assumptions
such as the discount rate and assessing
inputs used such as customer numbers,
revenue per customer, revenue growth
rates by comparing them to historical
data
reconciled the identified provisional fair values to
the accounting records, and
considered and assessed the adequacy of the
Group’s disclosures of business combinations in
accordance with Australian Accounting Standards
127
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and indefinite
life intangibles
(Refer to note 16) $8,992m
The Group recognises assets for goodwill and
indefinite life intangibles (brand names), which are
allocated to a cash generating unit (CGU). The
Group has two cash generating units for goodwill
which are Corporate and Consumer. Under
Australian Accounting Standards, the Group is
required to test the carrying value of goodwill and
indefinite lived intangible assets annually for
impairment, irrespective of whether there are
indicators of impairment.
Given the current condition and outlook of the
economic environment and due to the dynamic
nature of the industry in which the Group operates,
there is a risk that there could be material
impairment to goodwill and indefinite life
intangibles. Determination as to whether or not
there is an impairment relating to an asset in a CGU
involves significant judgment about the future cash
flows and plans for these assets and CGUs.
Forecasting of future cash flows requires estimation
of EBITDA growth rates, discount rates and future
economic conditions including the impact of
changing technologies and consumer preferences.
The recoverable amount of goodwill and other
indefinite life intangible assets was a key audit
matter given the financial significance of the
intangible assets to the consolidated statement of
financial position and judgement applied by the
Group in completing and concluding on the
impairment assessment, the determination of the
Group’s CGUs and the allocation of goodwill to the
CGUs.
We performed the following procedures, amongst others:
developed an understanding of the key controls
associated with the identification of impairment
indicators and the preparation of the discounted
cash flow models used to assess the recoverable
amount of the Group’s CGUs (the impairment
models)
evaluated the Group’s methodologies and their
documented basis for key assumptions utilised in
the value in use (VIU) model
evaluated the Group’s assessment of whether
there were any indicators of asset impairment, by
inspecting relevant industry and broker reports
and assessed managements internal reporting and
the long-range plan
tested the mathematical accuracy of the VIU
model’s calculations
assessed whether the allocation of the Group’s
goodwill and intangible assets into CGUs, which
are the smallest identifiable groups of assets that
can generate largely independent cash inflows,
was consistent with our knowledge of the Group’s
operations and internal Group reporting
assessed whether the CGUs included assets,
liabilities and cash flows directly attributable to
each CGU and a reasonable allocation of
corporate assets and overheads
considered if the VIU model used to estimate the
recoverable amount of the assets is consistent
with the requirements of Australian Accounting
Standards
compared the key assumptions used in the VIU
model to historical results, economic and industry
forecasts
compared the forecast cash flows used in the VIU
model to the most up-to-date budgets and
Full-Year Financial Results for the year ended 31 December 2020
128
Independent Auditor’s Report continued
Key audit matter
How our audit addressed the key audit matter
business plans formally approved by the Board
evaluated the Group’s historical ability to forecast
future cash flows by
o
o
comparing budgets with reported actual
results for the past year, and actual cash
flows for previous three years to forecast
cash flows and
evaluating the support available from the
Group for significant differences in
actual and forecast cash flows
assessed the terminal value growth rates by
comparing to external information sources with
the assistance of our valuation experts
with the assistances of our valuation experts we
assessed whether the discount rate appropriately
reflected the risks of the CGUs by comparing the
discount rate assumptions to market data,
comparable companies and industry research
assessed whether cash flows for periods beyond
those covered by formal plans assumed a steady
or declining growth rate for cash flows
assessed the Group’s consideration of reasonable
possible changes in key assumptions that would
cause an impairment
compared market capitalisation the Group to the
Group’s net assets
considered and assessed the adequacy of the
Group’s disclosures of impairment of goodwill
and indefinite life intangible assets in accordance
with Australian Accounting Standards
129
Key audit matter
How our audit addressed the key audit matter
Recognition of deferred tax assets – initial
recognition
(Refer to note 6) $819m
The Group has recognised an income tax benefit
related to tax losses and timing differences that
were previously unrecognised. We consider this to
be a key audit matter due to the magnitude of the
tax benefit recognised and the significant
management judgement that is required to
determine the recognition of deferred tax assets.
Given the acquisition of TPG Corporation the
Group engaged a third-party tax expert to consider
the availability of tax losses to be utilised under
income tax legislation. This required judgement
about the application of income tax legislation.
Under Australian Accounting Standards, deferred
tax assets are only recognised to the extent that it is
probable that sufficient taxable profit will be
available in the future to utilise the benefit. This
assessment requires assumptions about the
generation of future taxable profits derived from
management’s estimate of future cash flows.
We performed the following audit procedures:
with the assistance of our tax experts we have
assessed the Group’s third party tax expert’s
advice provided in respect of the continuity of
ownership test to assess the availability of tax
losses as a result of the acquisition of TPG
Corporation
assessed the competence and capability of
management’s expert
inspected the tax loss calculations prepared by
management and agreed the total carried forward
tax losses to the income tax return as lodged for
the year ended 31 December 2019
inspected the forecasts prepared by management
to determine future taxable profits including
critically assessing significant estimates and
judgements in the forecasts
assessed the tax loss utilisation schedule prepared
by management
obtained the allocable cost amount (ACA)
calculation prepared by the third party tax expert
and with the assistance of our tax experts checked
the ACA calculation to assess whether the
methodology is appropriate under income tax
legislation and that the calculation is
mathematically accurate
tested the inputs to the ACA calculation to
underlying data for accuracy
considered and assessed the adequacy of the
Group’s disclosures of the recognition of deferred
tax assets related to previously unrecognised tax
losses and temporary differences in accordance
with Australian Accounting Standards
Full-Year Financial Results for the year ended 31 December 2020
130
Independent Auditor’s Report continued
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2020, but does not include
the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the Chairman and CEO’s Letter, Strategy and performance, Key
risks, Operating and financial review and Director’s report. We expect the remaining other information
to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
131
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 29 to 59 of the directors’ report for the
year ended 31 December 2020.
In our opinion, the remuneration report of TPG Telecom Limited for the year ended 31 December
2020 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
S Prakash
Partner
Sydney
25 February 2021
Full-Year Financial Results for the year ended 31 December 2020132
ASX additional information
for the year ended 31 December 2020
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in
this report is set out below. The shareholding information is current as at 28 February 2021. As at that date, there were
1,859,341,669 ordinary shares held by 22,463 shareholders.
Substantial shareholders
The number of shares held by substantial shareholders and their associates, as disclosed in substantial holder notices
are set out below:
Name of shareholder
CK Hutchison Holdings Limited and its subsidiaries1
Vodafone Group Plc and its subsidiaries1
Vodafone Hutchison (Australia) Holdings Pty Ltd1
NUMBER OF
ORDINARY
SHARES HELD
1,186,182,662
1,186,182,662
1,186,182,662
Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust2
931,530,176
David Teoh and Vicky Teoh and their associates
Washington H Soul Pattinson and Company Limited
Brickworks Limited3
318,315,608
234,396,121
234,396,121
% OF ISSUED
CAPITAL
63.80%
63.80%
63.80%
50.10%
17.12%
12.61%
12.61%
1. Substantial holding for each of these substantial holders includes 13.70% from a deemed relevant interest in Shares the subject of a Voluntary Escrow
Deed. None of the substantial holders have any control over that 13.70%. Substantial holding also includes 25.05% from a deemed relevant interest
arising from a shareholders agreement dated 24 June 2020. For further details, see Form 604s lodged with the ASX on 15 July 2020.
2. Substantial holding arises from its interests in CK Hutchison Holdings Limited. The interests disclosed for this substantial holder are in respect of the
same shares identified as being interests of CK Hutchison Holdings Limited. For further details see Form 604 lodged with the ASX on 15 July 2020.
3. Brickworks Limited’s substantial holding in the company arises by virtue of its holding a 39.4% interest in Washington H Soul Pattinson and Company
Limited. For further details see Form 604 lodged with the ASX on 17 July 2020.
Number of restricted securities subject to voluntary escrow
NUMBER OF RESTRICTED SECURITIES SUBJECT TO VOLUNTARY ESCROW
DATE ESCROW PERIOD ENDS
1,186,182,662 ordinary shares
12 July 2022
Distribution of equity security holders
An analysis of the number of shareholders by size of holding as at 28 February 2021 is set out below:
Number of shares held
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
The number of shareholders holding less than a marketable parcel of ordinary shares is 1,202.
NUMBER OF
HOLDERS
12,128
7,375
1,537
1,300
123
22,463
133
NUMBER OF
ORDINARY
SHARES HELD
% OF
CAPITAL
HELD
517,345,024
231,596,121
207,092,576
207,092,576
110,778,498
109,154,913
103,916,318
84,336,903
35,037,988
23,475,693
16,486,191
15,722,701
13,662,239
12,625,118
9,468,839
9,468,839
6,970,199
6,711,409
6,312,559
6,312,559
27.82
12.46
11.14
11.14
5.96
5.87
5.59
4.54
1.88
1.26
0.89
0.85
0.73
0.68
0.51
0.51
0.37
0.36
0.34
0.34
1,733,567,263
93.24
Twenty largest shareholders (as at 28 February 2021)
Name of shareholder
VODAFONE HUTCHISON (AUSTRALIA) HOLDINGS LIMITED
WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
HUTCHISON 3G AUSTRALIA HOLDINGS PTY LIMITED
VODAFONE OCEANIA LIMITED
TSH HOLDINGS PTY LTD
VICTORIA HOLDINGS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DAVID TEOH
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
VICKY TEOH
BNP PARIBAS NOMINEES PTY LTD
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