Telstra CEO Andrew Penn (pictured) warned the industry is facing increased competition which has led to stronger pressure on fixed and mobile margins, as Australia’s largest mobile operator issued a fiscal 2018 guidance update based on its performance to end-April.

The margin warning comes despite what the CEO said was “strong progress against Telstra’s strategy” and growth in subscriber numbers in both fixed and mobile: “The challenging trading conditions in FY18 are expected to continue in FY19, including ongoing pressure on mobile and fixed ARPU and the accelerating impact of the NBN,” Penn said at a financial conference in Boston on 14 May.

For its fiscal Q3 (ending 31 March), the addition of 60,000 post paid subscribers was offset by a 3.6 per cent year-on-year decline in post paid ARPU to AUD65.35 ($49.14). Prepaid, and mobile broadband revenue also fell year-on-year.

In a statement the operator forecast mobile EBITDA will drop in fiscal 2018 due to these declines as it continues to focus on reducing costs: it predicted underlying core fixed costs to decline about 7 per cent.

Telstra is expected to incur incremental restructuring costs of about AUD300 million, which is in line with its FY18 guidance of AUD200 million to AUD300 million.

EBITDA presssure
While re-affirming its FY18 guidance, which assumes wholesale product price stability, Telstra now expects EBITDA to be at the bottom end of a previously stated range of AUD10.1 billion to AUD10.6 billion. Annual capex is expected at the mid- to upper-end of the AUD4.4 billion to AUD4.8 billion range.

The operator said it will provide an update in the second half of June regarding additional strategies it is implementing to address these pressures, leveraging the investments already made as part of its strategic investment plan.

Telstra reported a 5.8 per cent fall in net profit to AUD1.7 billion for fiscal H1 2018 (the six months to end-December 2017: the latest figures released by the company), on revenue of AUD14.5 billion, up 5.9 per cent.

In early February Penn highlighted the need for continued investment in new technologies to remain competitive.