Thursday, 23 February, 2017

Telstra registers profit drop in first half

Telstra CEO Andrew Penn Telstra CEO Andrew Penn
Nellie Chapman | 17 February, 2017, 01:21

"Telstra has invested heavily in regional Australia and will continue to do so if the regulatory settings remain in place".

Adjusted for the impact of the Australian Competition and Consumer Commission decisions on mobile terminating fees and regulated wholesale pricing of fixed line services, total income and EBITDA grew 2.2 per cent and 2.4 per cent, respectively, Telstra CEO Andy Penn told a briefing on the results.

Net profit plunged 16.4 percent year-on-year to AUD 1.7 billion for the 6-month period. Total income (excluding finance income) was AUD13.703 billion, compared to AUD13.802 billion, with EBITDA also declining - by 1.6% y-o-y - to AUD5.189 billion.

The telco's net promoter score was eight points lower than the same time a year ago as a result of a series of damaging network outages Telstra experienced in the first half of 2016. Meanwhile, its pre-tax earnings (EBIT) fell by 9.3 per cent, to $2.9 billion. At the same time, the company's fixed network, including NBN, grew by 51 per cent and traffic on the Telstra Air network increased by a factor of nearly 10. Its EBITDA of $5.18 billion was at the low end of earlier guidance of "low-to-mid single digit", coming in as a 1.6 per cent decrease overall, and a 2.4 per cent rise based on its guidance criteria.

Interim dividend was flat at 15.5 cents a share, fully franked. Free cash flow is expected to be in the range of A$3.5-4 billion and capital expenditure is expected to be approximately 18 per cent of sales.

Chief executive Andrew Penn said the results a good performance in a highly competitive market, gaining customer numbers and increasing market share in NBN.

While Penn pointed to pricing competition and the accelerated NBN rollout as factors impacting Telstra's performance, the company also placed much of the blame for its income downturn on the Australian competition watchdog's decision to reduce mobile call and SMS termination rates past year, as well as its move to reduce backhaul prices.

The fiscal year 2017 guidance also excludes the A$246 million Ooyala intelligent video subsidiary impairment in fiscal year 2016; and excludes restructuring costs in fiscal year 2017 of A$300 million-A$500 million.