The national broadband network is beginning to cut deeper into Telstra’s earnings but the telco is showing signs of resilience by boosting subscriber numbers and reducing costs.
The company says the NBN has had an $870 million impact on earnings to date, including $370 million in the first half of the current financial year, and expects it will cost about $3 billion over the course of the rollout.
NBN connections have surged recently, helping NBN Co – the company behind the network – more than double its revenue for the first half of 2017/17 to $891 million.
Telstra chief financial officer Warwick Bray warned the impact of customers migrating to the NBN and increased competition will weigh more heavily on the telco’s earnings over the next two to three years.
“We haven’t signalled what we expect will be in the second half but what I would say is we are at the peak period of the NBN rollout,” Mr Bray told AAP.
Chief executive Andy Penn said Telstra had performed well overall, despite the NBN pressure, with underlying profit – which excludes a $273 million writedown of Telstra’s US streaming business – up 10.3 per cent to $2 billion.
Driving the lift was an increase in subscribers to mobile and fixed line services, and a reduction in fixed costs.
The number of subscribers increased by 235,000 in the half, bringing the total number to 17.6 million, thanks to the release of Apple’s iPhone X which helped drive 130,000 new customer mobile plans.
Telstra also reduced fixed costs by $249 million in the six months to December 31, while it is targeting $1.5 billion in net productivity gains over the next four years.
Telstra’s revenue from ordinary activities was flat at $12.9 billion, despite the jump in subscribers, on the back of an 8.3 per cent fall in fixed line revenue – primarily phone and broadband services – and a six per cent dip in data and internet protocol revenue.
Net profit slipped 4.9 per cent to $1.7 billion on the previously announced $273 million writedown of the value of US streaming business Ooyala to zero.
Telstra has also cut its interim dividend to a fully franked 11 cents, down from 15.5 cents a year ago, as part of a change to its long-held dividend maintenance policy flagged in 2017.
The move steered the telco away from its historical practice of paying almost all profits in dividends, to paying 70 to 90 per cent – a ratio it says is “more in line with global peers and local large companies”.
The telco has reaffirmed its expectations of a 22 cent full-year dividend and retained its full-year earnings guidance of between $10.1 billion and $10.6 billion, due to one-off gains from the NBN.
Telstra shares closed two cents higher at $3.45.
NBN CUTS DEEPER INTO TELSTRA:
* Net profit down 4.9pct to $1.7b
* Revenue up 0.8 per cent to $12.9b
* Dividend down 4.5 cents, to 11 cents, fully franked