Running head: BUSINESS FINANCE 1

TPG TELECOM LIMITED

INTRODUCTION

TPG Telecom Limited (ASX: TPM) is a telecommunications company in Australian

telecommunications industry. TPG Telecom Limited has managed to provide its clients with

cost effective, dependable and fast communication services. Through its network assets,

products, staff and innovations, the TPG Telecom Limited has enlightened its customers

needs.

TPG Telecom Limited provides various communication services to small and medium

enterprises (SMEs), large corporates, the Government, residential users and wholesale

customers. TPG Telecom Limited communication services include nationwide ADSL2+,

telephone services, Fiber Optic and Ethernet broadband access, NBN, SIM Only Mobile

plans, Internet Protocol Television (IPTV) and various other business networking solutions.

TPG Telecom Limited as a company owns a diverse end-to-end infrastructure network

that includes an extensive inter-capital and metropolitan fiber optic network, more than 400

DSLAM telephone enabled exchanges throughout Australia and an international PPC-1

submarine cable that connects Guam and Australia with onwards connectivity to Asia and the

United States of America (USA).

Since TPG Telecom Limited owns and operates their own data and internet network

infrastructure, carrier-grade voice, they have a network capability that delivers special and
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quality performance throughout all levels of the organization thus taking up all end-to-end

responsibility in the services we offer.

This paper discuss the various types of risks that the company, TPG Telecom Limited,

experiences in its functioning (risk profile). The risks discussed affect the company

financially (financial risk), operationally (operational risks) and capitally (capital risk/

shareholders risk)

Risk Profile

As a telecommunications giant in Australia, the TPG Telecom Limited faces a diverse

selection of risks that include, operational risks, and financial risks. It is for this reason that

the TPG Telecom Limited board came up with the Audit and Risk committee. The

committees function is to identifying and mitigate each and every risk that affects the TPG

Telecom Limited directly or indirectly.

Financial Risk

TPG Telecom Limiteds risks that challenge its financial aspect are as follows:

Credit risk

This risk arises in the circumstance that a counterparty or customer fails to meet their

conjectural obligation to a financial instrument leading the group to suffer loss financially.

Credit risk affects the company in two fields, the industry and the geographical field.

Geographically, the companys exposures to credit risk extend only in Australia. By industry,

the company is not subject to any denseness of credit risk since its clients operate a diverse

range of industries.

Liquidity Risk

This is risk to the company if at all they will not be capable to meet their

indebtedness. This may be caused by the company, TPG Telecom Limited, falling due. To

approach this risk, the company ensures that it has sufficient liquidity to cater for its liabilities
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in due time whether times are stressing or normal and also ensuring that in so doing they do

not incur extra or unacceptable loss.

Market risk

This refers to the risk caused by alterations in the market price. This alterations may

occur in interest and foreign exchange rates. To optimize returns and keep this risk within

acceptable parameters, the group formed a market risk management team to control and

manage these exposures.

Other financial risks

Currency risk

The TPG Telecom Limited is an Australian based company whose base currency is

the Australian Dollar (AUD). The risk of currency occurs when the company meets revenues,

expenses, borrowings and receivables in a different currency other than its base currency.

However, the TPG Telecom Limited is not fully exposed to this risk as its exposure to other

countries is insignificant to be considered as a significant loss to the company.

Interest rate risk

Interest rate fluctuate from time to time and this causes shifts in a companys

expectations. In 2010, TPG Telecom Limited adopted a hedging policy to guard against the

risk of interest rate risk. The policy hedged in seventy five percent (75 %) of their maximum

loan value for the facilitation of its debts.

Equity price risk

Available-for-sale equity securities have exposed the TPG Telecom Limited to equity

price risks. This has led to material investments being managed on individual basis so as to

maximize returns.

Operational risks

Competition
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TPG Telecom Limited being the second largest telecommunications company in

Australia faces increasing competition that could impact the companys performance. In the

mitigation of these risk, TPG Telecom Limited reviews its customers offerings continually

ensuring that their customers gain more and are content.

Business interruption

The risk of business interruptions arise with systems or network failure within the

company that could lead to customer agitation. It is for this reason that TPG Telecom Limited

invests majorly in its systems and network capacity in order to improve the performance and

resilience of their networks and systems.

Regulatory environment

As TPG Telecom Limited broadcasts its services over a wide range of locations, it

may encounter environments whose regulations may cause a significant impact to the

companys business activities. Through monitoring regulatory developments within their

areas of operation and taking part where necessary with the pertinent bodies and also

monitoring its compliance and regulations, the company, TPG Telecom Limited, is able to

keep this risk in check.

Capital Risk

Capital risk can as well be referred to as shareholders risks as it affects the

shareholders expectations. Shareholder satisfaction is and will always be a companys

systematic risk. It refers to the probability of the company not meeting its shareholders needs.

References

TPG Telecom Limited annual report, (2012).

TPG Telecom Limited annual report, (2013).

TPG Telecom Limited annual report, (2014).

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King, M. (2015). TPG Telecom set to become Australias second largest telco.

Retrieved from: http://www.fool.com.au/2015/08/20/tpg-telecom-set-to-become-australias-

second-largest-telco/

TPG website. About us. Retrieved from: https://www.tpg.com.au/about/profile.php