NBN, restructuring costs hit Telstra hard - Mobile World Live

NBN, restructuring costs hit Telstra hard

14 FEB 2019

Telstra, the largest mobile operator in Australia, reported a sharp drop in profit and a decline in revenue for its fiscal H1, which it attributed to the impact of the country’s NBN rollout and significant restructuring costs.

In the six months to end-December 2018, net profit dropped 27.4 per cent year-on-year to AUD1.2 billion ($853 million), while total revenue declined 1.7 per cent to AUD12.6 billion.

Restructuring costs under the Telstra2022 strategy totalled AUD300 million.

CEO Andrew Penn (pictured) said in a statement: “This has been a challenging time as we continue to see increasing competition in the mobile market, and Telstra feels the unique impact of the transition to the NBN network. As previously stated in our disclosures and guidance, we expect to see these factors continue to weigh on our revenue over the short term.”

He said Telstra has absorbed AUD1.7 billion of the estimated AUD3 billion negative impact of the NBN rollout on its EBITDA, noting: “The anticipated impact of NBN is why we announced our T22 strategy in June last year.”

Post paid strength
While the financial results show parts of its business continue to face short-term challenges, Penn said there are positive signs particularly with the significant increase in post paid mobile services.

A 2.4 per cent increase in mobile revenue to AUD5.29 billion was driven by a 9.8 per cent gain in equipment sales to AUD1.51 billion and a 35.6 per cent rise in IoT revenue to AUD99 million.

Post paid revenue increased 2.1 per cent to AUD2.67 billion; prepaid dropped 9.1 per cent to AUD449 million; and mobile broadband fell 15.8 per cent to AUD350 million.

The operator added 240,000 mobile subscribers, taking its total to 18 million at end-December. Paid post ARPU of AUD55.62 was down 2.4 per cent; prepaid dipped 0.7 per cent to AUD22.54.

Fixed revenue dropped 9.6 per cent to AUD2.72 billion, while data and IP turnover fell 6.2 per cent to AUD1.22 billion.

Capex for period rose 1.8 per cent to AUD2.34 billion.

Cost cuts
Penn noted it has made significant progress reducing costs and is on track to meet fiscal 2019 targets as part of the goal of achieving an AUD2.5 billion net productivity improvement by 2022.

Underlying fixed costs in H1 were down 4.2 per cent. Nearly AUD900 million in annualised cost reductions have been achieved since fiscal 2016, he said, adding “we will be accelerating our productivity programme in the second half of FY19 and into FY20”.

Against a target of removing 8,000 full-time roles by fiscal 2022, he said 3,200 people left the business including more than 1,500 management and executive roles.

The operator reconfirmed its fiscal 2019 guidance targeting total income of AUD26.2 billion to AUD28.1 billion and EBITDA (excluding restructuring costs) of AUD8.7 billion to AUD9.4 billion.

Capex for the fiscal year is set at AUD3.9 billion to AUD4.4 billion.

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Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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