Investors in David Teoh’s TPG Telecom have mounted a rebellion against the company’s poor disclosure on pay delivering a first strike at its annual general meeting.
Mr Teoh and Washington H Soul Pattinson control about 60 per cent of the company’s shares. Mr Teoh was ineligible to vote on the remuneration report. Despite Robert Millner sitting on the board of directors of both Washington H Soul Pattinson and TPG, Soul Patts was still able to vote.
TPG has copped a strike against its remuneration report Photo: Rob Homer
Of the remaining free float about three-quarters of the votes cast were against the adoption of the pay report meaning TPG copped an almost 30 per cent no vote.
This is the company’s first strike under the ‘two strike’ rule, which requires a spill resolution to be held determine whether board members will stand for re-election if there are two consecutive AGMs where shareholders vote in excess of 25 per cent against the remuneration report.
Mr Millner described it as a “protest vote” that was “disappointing” though refused to comment on how Soul Patts cast its votes.
He said there was little change between the remuneration reports of 2016 and 2017.
In September, TPG announced they were cutting their dividend from 7.5 cents to a fully franked two cents.
And the company experienced its biggest share price drop of the year in April, when it fell 16 per cent to $5.50. The share price has since recovered to $6.12 at 1248 AEST, the highest result since the drop.
Robert Millner, Chairman of Washington H. Soul Pattinson. Photo: Ben Rushton BGR
TPG director Denis Ledbury said he was also “disappointed” in the number of votes against the report, given the company’s success over the years.
Shareholders raised differing concerns about the structure of the board, including the lack of women and the type of skills that might be needed in the next three years as TPG builds Australia’s fourth mobile network.
Mr Teoh’s salary and fees totalled $1,601,000 in 2017 – compared to $1,600,000 in 2016. His short term incentive cash bonus was a steady $1,600,000 in both years.
His non-monetary benefits totaled $117,000 in 2017, compared to $45,000 in 2016, increasing his overall total short-term package from $3,245,000 to $3,318,000.
Dean Paatsch, director at proxy advisory firm Ownership Matters, said a large part of the remuneration problem simply related to disclosure.
“TPG has had an up and down year,” Mr Paatsch said.
“The issue was that there is no disclosure about what makes up the bonus.”
That concern was echoed at the meeting.
The majority in attendance applauded announcements from Mr Teoh that the board would remain stable and likely at its current size and composition.
Mr Teoh pointed to the “remarkable stability of our senior management team” with an average tenure of 17 years and modest remuneration compared to companies in the industry.
He also flagged the “margin headwinds that the group is facing as a result of the building of the NBN network, and the consequential decline in the company’s share price over the past year”.
“However, I am confident that the strategies we are implementing will continue to create excellent value for shareholders over the long term,” he said.
The big change that is on the cards for the telecommunications company is its move into mobile, in particular plans to take on Optus, Telstra and Vodafone with a fourth mobile network.
This includes plans to spend $600 million over three years to build a mobile network covering 80 per cent of the population. TPG previously paid $1.26 billion for a slice of the 4G mobile spectrum.
“Whilst TPG’s success to date has come largely in the fixed line segment of the market, we have long recognised the importance of wireless connectivity to the future needs of consumers”, he said.
A Telsyte Australian Mobile Services Study 2017 found two in five Australians would consider moving to this new TPG network when it was ready, on the condition of clear benefits, free trial periods, unlimited data or bundling discounts.
TPG claimed it would offer six months of free mobile services to people in Canberra, who are set to be the first rollout city when it launches the new network in 2018.
But the report warned it would be difficult for the carrier to reach one million services in operation within two years of its own network being launched.
“The challenge for TPG will be to profitably bring new services to market without simply attracting bargain hunters,” Telsyte senior analyst Alvin Lee said.
When pressed on the different ways TPG intended to lure customers outside of discounts and bundling, Mr Teoh did not provide concrete examples but said they would look at ways to differentiate themselves from competitors.
“It’s a long-term strategy … initially there will be some pressure,” he said.
TPG has over 21,000 kilometres of fibre optic cables installed across the country, with the $600 million budget expected to cover 2500 mobile sites at $240,000 a site.
Fiscal 2018 year to date results were tracking to the guidance published in September.
Initially, the roll out will be to major capital cities, including the competitive Sydney and Melbourne markets, but Mr Teoh said they would later look at smaller markets, including NSW major regional hubs Newcastle, Wollongong and Gosford, and Victoria’s Geelong and Ballarat.