Home Telecoms & NBN Revenue down, profits fall sharply as Telstra faces stiff competition
Revenue down, profits fall sharply as Telstra faces stiff competition Featured

Telstra has suffered a sharp fall in profits for the second year running, with the big telco hit with a 9% fall in net profits for the full-year 2018 to $3.5 billion, according to results released on Thursday.

The big drop in profits comes on the back of a fall in fixed revenues for 2018, with Telstra reporting fixed revenue declined by 9.2% to $5,81 billion, attributing the impact to NBN migration and competitive pressures.

On the mobile front, Telstra reported mobile revenue increased slightly, by 0.4% to $10,1 billion.

The company reported retail customer services increased by 342,000 during the year, bringing the total to 17.7 million – and the telco now claims 7.9 million post-paid handheld retail customer services, an increase of 304,000, including 67,000 from the Telstra-owned broadband provider Belong.

On the negative front, retail fixed voice subscriber numbers fell, declining 472,000, although Telstra reports there were 88,000 retail fixed data net subscriber additions including 48,000 from Belong, bringing total retail fixed data customers to 3.6 million.

Telstra chief executive Andy Penn described the telecoms market as “challenging” despite focusing on what he said was “strong customer growth”, adding 342,000 retail mobile customers, 88,000 retail fixed broadband customers and 135,000 retail bundles during FY18.

Telstra also declared a fully franked final dividend of 11 cents a share for the 2018 full year, bringing the total dividend for the financial year to 22 cents per share, comprising an ordinary dividend of 15 cents and a special dividend of 7 cents.

Basic earnings per share reduced 7.7% to 30.0 cents.

According to Penn, the results showed strong customer growth for the year and good progress on the company’s productivity program.

“However the continued downward pressure on EBITDA and NPAT caused by the further rollout of the NBN and lower average revenue per user clearly reinforced the importance of the T22 strategy,” Penn said.  

He warned that the challenging trading conditions were expected to continue in FY19, including ongoing pressure on ARPU and further negative impact of the NBN network rollout on Telstra’s underlying earnings.

 “While it is less than two months since we presented our new strategy, we are well into the execution phase, building on the momentum provided by our up to $3 billion strategic investment in Networks for the Future and digitising the company,” he said.

Telstra announced its new T22 strategy in June this year with its aim of “leading the Australian market” by simplifying its operations and product set, improving customer experience and reducing its cost base. The company plans to sack 8000 employees in all – getting rid of 9500 and hiring 1500.

The telco has said T22 would deliver six key outcomes covering customer experience, simplification, network superiority, employees, cost reduction and strengthening the balance sheet.  

Penn said Telstra had already made strong early progress on the new T22 strategy, launching new mobile plans with no excess data charges, and announcing a new organisational structure, leadership team and operating model.

And he said Telstra InfraCo — a fixed telco infrastructure provider — had also been established as a standalone business unit with pro-forma financials provided as part of the financial results.

Penn asserted that Telstra remained on track to realise the benefits of the investment program, with $1.8 billion invested to date, including $1.5 billion in Networks for the Future, as the company prepares for the launch of 5G, and $300 million on digitisation.

He said this had enabled Telstra to grow the competitive differentiation provided by its “network superiority and reliability”.

“Our ongoing strategic investment in the performance of our mobile and fixed networks for our customers has been recognised by a number of key industry benchmarks. We were ranked number one on the Netflix Speed Index in July 2018 and also became the first Australian provider to win both the fixed and mobile Ookla fastest networks for Q1-Q2 2018.

“We also continued to make significant progress in preparing for the commercial launch of 5G, which is central to Telstra’s network investment strategy, through a number of major milestones.

“Yesterday we announced we had switched on 5G technology across selected areas of the Gold Coast, making us the first in the country to be 5G ready, and we expect to have more than 200 5G-capable sites live around the country by the end of 2018.”

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

 

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