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Telstra's profit falls and there's more pain to come

Business

Telstra has warned of increased competition and the continued impact of the NBN rollout on its bottom line in the current financial year, after the telco giant’s full-year profit dropped 8.4 per cent to $3.56 billion.

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Total revenue for the 12 months to June 30 was largely unchanged at $26 billion, with mobile revenue growth flat at 0.4 per cent and fixed line revenue declining 9.2 per cent.

That prompted the company to declare a final dividend of 11 cents per share, down from 15.5 cents a year earlier and leaving full-year dividend at 22 cents, down from 31 cents a year ago.

Chief executive Andrew Penn said the impact of the rollout of the NBN had affected the company’s earnings by about 30 per cent.

“When you flow it down to the bottom line, that’s more like 50 per cent of the profit historically that Telstra has received (that) is impacted by the implementation of the NBN,” he said on a media call today.

Penn said there were “major structural problems” with NBN wholesale prices, which have significantly reduced the company’s margins.

However, the telco managed to snag 51 per cent of the NBN’s total market share – excluding satellite – with connections growing by 770,000 to 1,946,000.

Competition in the mobile market has also created challenges for the company, forcing them to lower prices and increase data allowances.

Postpaid handheld revenue declined by 1.4 per cent to $5.37 billion, with average revenue per user (ARPU) dropping by 3.4 per cent from $67.70 to $65.41.

“We expect ARPU declines to continue into (the next financial year), including from ongoing competition and the impact of T22 mobile initiatives,” Penn said.

Telstra2022, or T22, is the company’s new strategy, aimed at simplifying customer experience and reducing cost base.

The strategy, announced in June, includes the slashing of a quarter of the telco’s workforce, which Mr Penn expects to happen in “stages”.

He was optimistic about a key element of T22 – the rollout of the ultra-fast 5G network – which is already underway on the Gold Coast.

“We believe we’ve got the right strategy, we believe we’re making the right investments, building the right capabilities,” he said.

In 2018/19, core earnings are expected to be in the range of $8.8 billion to $9.5 billion, excluding restructuring costs of about A$600 million.

By 1230 AEST, Telstra shares had hit their highest level since May, and were trading 19 cents, or 6.6 per cent higher, at $3.08.

COMPETITION HITS TELSTRA FY PROFIT

NET profit down 8.4pct to $3.56b

REVENUE flat at $26b

TOTAL final dividend 7.5 cents/sh vs 15.5 cents year ago

– AAP

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