Australia’s largest operator Telstra reported strong revenue growth for the July-December period, driven by handset sales and its enterprise group, but a jump in operating costs left its net profit mostly flat.

The operator’s net profit after tax rose 0.8 per cent to AUD2.1 billion ($1.5 billion), while EBITDA increased 1.7 per cent to AUD5.4 billion for its fiscal H1 ending 31 December.

The results were the first full six-month operating period with Pacnet, which it acquired in April 2015. The company boosted its interim dividend 3.3 per cent to 15.5 cents, returning AUD1.9 billion to shareholders.

Overall revenue expanded 9.1 per cent to AUD14.2 billion, with enterprise sales growing 21 per cent to AUD3.2 billion. Retail turnover, which includes mobile, was up 2.1 per cent to AUD8.7 billion, while wholesale turnover increased 5.3 per cent to AUD1.3 billion.

Operating expenses surged 14.2 per cent to AUD8.8 billion, or 11.4 per cent excluding Pacnet. The increase was largely driven by new growth businesses, including Pacnet, and sales costs associated with revenue and customer growth in its core businesses, said Telstra CEO Andrew Penn.

Its capex during the six-month period increased 20 per cent to AUD2.1 billion.

Mobile growth slows
Mobile revenue rose 3.7 per cent to AUD5.5 billion. But the growth was driven by equipment sales, up 18.5 per cent to AUD1.12 billion, with postpaid and prepaid service revenue flat or down slightly. M2M turnover was up 9 per cent to AUD60 million.

Postpaid ARPU fell 1 per cent to AUD69.03. Telstra added 235,000 mobile customers, including 80,000 postpaid users, to take its total subscriber base to 16.9 million. Its 4G network now covers 96 per cent of the population and it is working towards 99 per cent coverage by June 2017.

Revenue in its fixed business fell 1.5 per cent to AUD3.6 billion, with fixed data revenue growing 6.7 per cent to AUD1.3 billion but not able to offset a 7.6 per cent decline in fixed voice turnover.

Telstra earned AUD636 million under its NBN agreement with the government. It was awarded work as one of the network operations and maintenance services providers to NBN, with work expected to start in March.

Penn said Telstra is working to “simplify its business, drive down costs and help customers experience what technology can do for their lives and businesses. As a result, our net promoter score result was 3 points higher than the first half of FY15”.

He said its guidance for financial year 2016 remains unchanged. It expects to deliver mid single-digit income growth and low single-digit EBITDA growth. Capex is forecast at around 15 per cent of sales to fund increased mobile network investment. Capex as a percentage of sales in the first half was 15.2 per cent. The guidance assumes wholesale product price stability from the beginning of the financial year and no impairments to investments.