TPG Telecom has restructured the way it finances mobile handsets, allowing it to free up cash while still offering interest-free payment plans to customers.
The new structure sees the telco sell “eligible handset receivables” – money owed on the handsets and not yet paid – to an “off-balance-sheet” trust that is financed by a collection of lenders.
It’s understood the telco had a similar arrangement in place for the past three years, but it involved keeping part of the receivables on its balance sheet.
Under the new arrangement, TPG still buys a handset like an Apple iPhone or Samsung Galaxy and offers it to customers on a monthly repayment plan.
However, once the customer has made at least one payment, TPG sells the repayment plan (the receivable) to the trust “at a small discount to its face value.”
The trust then owns the right to future payments, and TPG passes those payments on as they come in.
At its core, this means TPG gets to recoup the full cost of the device upfront, instead of waiting 24 or 36 months to get all payments in from the customers.
The telco will sell some $750 million of existing phone plans currently being paid off to the trust by October 2025, and then add new ones on a quarterly basis.
This will free up cash that the telco can utilise elsewhere in its business – estimated to be around $600 million in FY25 alone.
Describing the new structure as “innovative”, TPG Telecom’s managing director and CEO Iñaki Berroeta said that the new handset management strategy will be much more efficient, and allows the company to remain “highly competitive” with deals on Apple iPhones, Samsung Galaxy smartphones and other handsets.
TPG noted in its ASX filing that it will use net proceeds from the scheme to repay bank borrowings.
