Australia’s largest telecoms operator Telstra reported a double-digit drop in profit for the first half of its fiscal year, with regulatory impacts and tougher competition weighing on its key mobile division.
The company’s net profit for the period ending 31 December 2016 fell 14.4 per cent to AUD1.79 billion ($1.37 billion), which it attributed to higher regulatory costs, planned restructuring costs and increased amortisation associated with shorter asset life for business software. EBITDA decreased 1.6 per cent to AUD5.2 billion.
The operator, which has a 52 per cent market share, said a number of regulatory decisions hurt its income and EBITDA for first half of its fiscal 2017. Without these impacts, it said total income rose through double-digit growth in network applications and services and increased receipts from NBN Co.
Overall revenue dropped 6.4 per cent year-on-year to AUD12.8 billion, with mobile service revenue falling 8.7 per cent to AUD5 billion and fixed-line revenue down 4.7 per cent to AUD3.3 billion. Fixed data revenue grew 1.8 per cent to AUD1.3 billion, and fixed voice revenue declined 9.4 per cent.
Telstra CEO Andrew Penn (pictured below) said the results showed Telstra had performed well in a highly competitive market, gaining customer numbers and increasing market share in NBN. “It is significant that we were able to increase subscriber numbers in mobiles and retail fixed plans despite the increased competition.”
He noted data volumes have increased and intense competition on pricing across fixed, bundles, mobile, data and IP had an impact.
Telstra added 200,000 domestic mobile customers, including 79,000 postpaid customers, to take its total mobile subscriber base to 17.4 million at the end of 2016. Postpaid ARPU, although down 2.6 per cent in the first half of FY17, has been stabilising, the operator said.
In the 12 months to end-December 2016, mobile traffic increased 39 per cent, traffic on the fixed network including NBN grew 51 per cent and traffic on the Telstra Air network increased almost ten times. NBN connections grew by 292,000 to 792,000 at the end of December, with Telstra’s market share (excluding satellite) now about 51 per cent.
Its machine-to-machine (M2M) revenue grew 13.3 per cent as it added 130,000 M2M services during the half year.
The market leader has about 6,400 4G sites, with more than 900 mobile sites upgraded to 4GX in the six month period. It expanded its hotspot network to more than 750,000 nationally and includes about 4,700 public hotspots.
Underlying core fixed costs were cut by 2.6 per cent or AUD92 million in 1H17, ahead of a target to reduce by more than 2 per cent each year. Reported operating expenses included increased ongoing network payments to NBN Co and one-off NBN migration and connection costs.
Telstra’s capex for the half was 16 per cent of revenue or AUD2.1 billion. It announced a strategic investment programme last year, earmarking up to AUD3 billion in additional capital investment. The programme is in early stages with investment expected to increase in the second half. Its FY17 guidance for capex to sales ratio remains at 18 per cent.
The operator reconfirmed its FY17 guidance of mid- to high-single-digit income growth and low- to mid-single-digit EBITDA growth.