Australian operator TPG Telecom set up a new financing structure aimed at creating up to AUD600 million ($395.6 million) in free cash flow this year and improving its overall capital efficiency.

The operator explained it will sell eligible handset receivables to an off-balance-sheet trust at a discount to face value, covering financing costs and credit risk. The sold handset receivables will no longer be recognised on its balance sheet, since substantially all risks and rewards associated with the receivables will have transferred.

MD and CEO Inaki Berroeta said the financing structure enables it to offer customers competitive deals on handsets via monthly interest-free payment plans, while “deploying our shareholders’ capital much more efficiently.”

He declared: “The facility is a first for our sector and is materially superior to prior handset receivables financing structures available in Australia.”

The company forecasts the new structure will directly contribute to an improvement in return on invested capital of about 40 basis points in 2025 and 110 basis points next year.

A group of seven banks, led by Macquarie Bank, will provide about AUD700 million in financing at borrowing margins reflecting TPG’s investment grade credit profile, the operator noted in a statement.

After selling pre-existing eligible handset receivables valued at around AUD750 million this month, future contracts will be sold quarterly, with total sales this year estimated at AUD900 million.

The operator said it will use net proceeds to repay bank borrowings, reducing its net bank borrowings to about AUD1.8 billion, down by AUD2.3 billion from 30 June 2025.

In early August, TPG unveiled plans to use its windfall from the sale of its fixed infrastructure assets to Macquarie-backed Vocus Group to pay down debt and return cash to shareholders.