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First-Half Revenue, Profit Slump; Telstra Shares Take A Bath

First-Half Revenue, Profit Slump; Telstra Shares Take A Bath

Telstra shares plunged 6.5 percent on the ASX yesterday after the No 1 telco reported a 12 percent drop in net income for the six months to December 31.  The shares closed at $4.85, down from $5.19 on Wednesday, with 118 million shares changing hands as some investors chose to bale out.

Underlying profit for the half-year was $1.79 billion, lower than the company’s guidance and missing analysts’ expectations for something more like $2.04 billion.

Revenue for the half was down 3.6 per cent from $13.3 billion to $12.8 billion.

Failure to add new customers at previous rates appears to have been a major cause of the profit slump. Telstra added just 200,000 customers between July and December, compared to 235,000 in the same period in 2015 – and 739,000 in the first half of 2013.

Telstra’s earnings from mobile products declined by $191 million to $2.1 billion in the half-year, which CEO Andrew Penn said was due to a regulatory decision about mobile terminating rates reducing the amount it receives for calls from the Vodafone and Optus networks.

Revenue from enterprise services dropped 6 per cent to $2.2 billion, and Penn noted there are now fewer people using Telstra modems to access the Internet, instead tethering their computers to mobiles. This saw Telstra’s mobile broadband revenue slump from $639 million to $545 million.

Penn was predictably still looking on the bright side, noting that Telstra increased customer numbers in mobiles, retail fixed plans and data, and making “very solid progress on our cost reduction program to mitigate the impact of these economic headwinds”.

Network applications and services was a rare good-news arena, with revenue up 18 percent to $225 million.

Telstra’s results were also boosted by $400 million in payments from NBN Co for one-off payments, construction contracts, and leasing Telstra underground pipes and space in its exchanges.

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