Thursday, 14 February 2019 09:44

Telstra profits drop by 28% as NBN continues to bite Featured

By
Telstra chief executive Andrew Penn. Telstra chief executive Andrew Penn.

Telstra has revealed a fall of 27.4% in its net profit after tax and a drop of 4.1% in its reported income for the first half of fiscal year 2019.

Profit came in at $1.2 billion compared to $1.6 billion for the corresponding period a year ago, while total income was $13.8 billion with EBITDA (earnings before interest, tax, depreciation and amortisation) falling 16.4% to $4.3 billion.

Telstra also announced a further cut in shareholders' half-yearly dividend, from 11c to 8c a share. The dividend is now just a little more than half of its high of 15.5c a share two years ago.

The telco said these results were in line with expectations due the impact of the NBN rollout.

Telstra added 239,000 new post-paid mobile subscriptions, including 125,000 on its Belong subsidiary, with an accompanying 2.1% rise in revenue growth from these services.

Chief executive Andrew Penn said the results showed solid performance in customer numbers and share in the face of intense competition, and also delivery against the Telstra2022 strategy unveiled last June.

The company said at the time that it would effect a net reduction of 8000 employees and contractors by 2022 and reduce two to four layers of management, leading to the cutting of one in four executive and middle management roles.

telstra hy2019

Another bright spot in the HY2018-19 results was that Telstra Wholesale added 125,000 mobile services and the company saw a 35.6% growth in IoT revenue.

“While today’s financial results show parts of our business continue to face short-term challenges, there are positive signs particularly with the significant increase in retail postpaid mobile services,” said Penn.

“Importantly, we remain very positive about Telstra’s prospects for the future. Demand for telco products and services continues to grow and telecommunications infrastructure is only going to increase in importance over the next decade.

"With the onset of 5G, we expect to see positive ARPU influences across the industry from uptake and new services as we have with other new Gs. We also hope there will be some improvement in NBN wholesale prices.

“Telstra’s circumstances today are very different from what they were before the NBN. We are no longer the national wholesale provider. That part of our business – the revenue and value –is being transferred to the NBN and that is reflected in our income, profit, and dividends.

“The anticipated impact of the NBN is why we announced our T22 strategy in June last year, enabled by our substantial $3 billion investment announced in 2016 to digitise the business and invest in networks for the future. These announcements were about preparing for the changing market dynamics and customer expectations.”

Telstra said it had made significant progress reducing costs and was on track to meet FY19 targets as part of the goal of achieving a $2.5 billion net productivity improvement by 2022.

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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