S&P Global Ratings has revised TPG Telecom’s outlook to stable from negative while affirming its BBB issuer credit rating. The agency expects mobile growth, lower capital intensity and balance-sheet repair to push adjusted debt-to-EBITDA below 2.75x from fiscal 2027, although spectrum costs remain a substantial test.
- S&P outlook revised to stable from negative; BBB rating affirmed
- Adjusted debt-to-EBITDA forecast at 2.8x in FY26 and about 2.5x from FY27
- Bank debt reduced by approximately A$2.7 billion in FY25
- A$2.1 billion of spectrum relicensing costs expected from FY28 to FY32
- Capex forecast to moderate to A$550 million-A$650 million annually after FY26
S&P removes negative outlook from TPG’s BBB rating
TPG Telecom’s credit trajectory has improved enough for S&P Global Ratings to remove the negative outlook hanging over its BBB issuer rating. The agency affirmed the long-term rating on 12 October and shifted the outlook to stable, citing an improving earnings path, stronger mobile performance and a more supportive financial policy.
This is an outlook change, not a ratings upgrade. S&P expects TPG’s adjusted debt-to-EBITDA ratio to sit at about 2.8 times in fiscal 2026, slightly above its 2.75 times rating trigger, before falling closer to 2.5 times from fiscal 2027. The stable outlook rests on that forecast improvement being delivered and sustained.
Mobile growth and lower capex underpin the forecast
S&P’s case is built around a simpler, more capital-light TPG following the company’s major business reset. The multi-operator core network agreement with Singtel Optus began in January 2025, while the sale of TPG’s fixed enterprise, government and wholesale business and the associated fibre sale-and-leaseback to Vocus generated A$4.7 billion in net proceeds. That transformation was covered in the company’s Vocus asset sale and network deal, which also reported the doubling of regional mobile coverage to 98.5%.
The ratings agency expects the expanded network reach, digital-value brands and subscriber momentum to support mobile earnings and average revenue per user. That view is consistent with TPG’s mobile growth half-year result, where mobile service revenue rose 3.1% and EBITDA increased 1%, although S&P also expects the company to keep addressing churn in its home broadband business.
Debt reduction has created more financial headroom
TPG reduced bank debt by approximately A$2.7 billion during fiscal 2025, taking the balance to A$1.4 billion from A$4.1 billion. S&P attributed the reduction chiefly to A$1.7 billion from the Vocus transaction, A$600 million from the sale of handset receivables financing and A$370 million from reinvestment-plan proceeds.
For fiscal 2026, S&P forecasts revenue of A$4.24 billion, EBITDA of A$1.67 billion and capital expenditure of A$750 million. It expects EBITDA margins of roughly 39% to 40% over the next two years, with annual dividends of A$360 million to A$380 million. S&P assesses liquidity as adequate, with cash, undrawn facilities and operating cash generation expected to cover the next 12 months’ uses by at least 1.2 times.
Spectrum renewals remain the key balance-sheet test
The cleaner balance sheet will face a sizeable future bill. TPG estimates A$2.1 billion of spectrum relicensing costs between fiscal 2028 and fiscal 2032, including front-loaded payments of A$840 million in fiscal 2028 and A$570 million in fiscal 2029. S&P expects regular capex to moderate as the 5G rollout and transformation programs conclude, but its forecast still shows fiscal 2028 free operating cash flow falling to just A$20 million after a projected A$1.47 billion of capex, largely reflecting spectrum payments.
The agency also flags risks that sit outside ordinary operating execution. Network-sharing commitments under the Optus MOCN agreement and TPG’s transmission and wholesale fibre access agreement with Vocus are treated as debt-like obligations, and their longer-term renewal terms could affect TPG’s competitive position and leverage. S&P says sustained adjusted debt-to-EBITDA above 2.75 times could put downward pressure on the rating, while an upgrade would require a sustained ratio below 2.0 times alongside successful execution of the growth strategy.
Bottom Line?
The stable outlook gives TPG more credit headroom, but the investment case now depends on converting mobile momentum into cash before spectrum payments arrive.
Questions in the middle?
- Can TPG sustain mobile subscriber and ARPU growth while repairing home broadband churn?
- Will adjusted debt-to-EBITDA fall below 2.75x from fiscal 2027 as S&P expects?
- How will the A$2.1 billion spectrum bill affect dividends, capex and leverage from fiscal 2028?