Published: Thu, February 15, 2018
Finance | By Loren Pratt

Telstra half-year revenue grows almost 6%, profit declines

Telstra half-year revenue grows almost 6%, profit declines

CEO Andrew Penn says Telstra is operating within a significant period of change, including migration to the NBN, competitive challenges, accelerating pace of technological change and preparation for the transition to 5G.

Profit for the six months to December 31 at Australia's biggest phone company was dragged 5 percent lower, as it wrote down to nothing the value of a six-year experiment in online video streaming.

Penn states, "Within that environment, we are pleased to have delivered a solid result in line with guidance for this half". It also cut dividends to 11 cents a share from 15.5 cents.

In terms of its media offerings, while Telstra was forced to write down Ooyala this month, resulting in a AU$273 million non-cash impairment, it said the Flex part of the IPTV business remains strong. For example, we're stepping up how we aggressively compete in the mobile market by leveraging our multi-brand strategy including Telstra Belong, Boost and Wholesale.

"We will accelerate our strategic investment program to build platforms for the future".

Penn said Telstra will continue focusing on both updating and extending its mobile network, saying the telco will complete more than 1,600 macro mobile builds including new sites, upgraded sites, and sites under the federal government's mobile blackspots program during FY18.

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.

Penn also used the financial results call to discuss the recent movement on the Universal Services Obligation (USO), which is set to be axed in 2020 in favour of a Universal Service Guarantee.

Network Application Services - which includes cloud applications and consulting services - continued to be Telstra's growth driver, with revenue up 14 per cent to $1.7 billion.

The move was made to encourage the network's resellers to provision more bandwidth capacity for customers and drive the uptake of high value services among end users.

Telstra announced at its full-year results in August an expected $3 billion earnings blackhole created by the NBN's erosion of traditional earnings streams, which meant existing dividend policies were unsustainable. Guidance for EBITDA is after absorbing incremental restructuring costs of $200 - $300 million to support its increased productivity. However, earnings were down 2.5 percent to $5.1 billion and net profit was down 5.8 percent to $1.7 billion.

At the same time, capital expenditure is expected to be between $4.4 - $4.8 billion or approximately 18 per cent capex to sales and free cashflow is expected to be in the range of $4.2 - $4.7 billion.

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