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Telstra Profit Down 5.8%, Dividend Slashed, Ooyala To Blame

Telstra has posted a 5.8% drop in half-year profit, slashing its dividend by 11 cents, following the $273 million write-down of its US streaming business ‘Ooyala’.

For the six months to December 31st, Telstra notched profit of $1.7 billion.

Revenue from ordinary activities remained relatively flat (climbing 0.8%) to $12.91 billion.

Mobile sales revenue also remained flat (up 0.8%) to $5.1 billion, while fixed line revenues slipped 8.3% to $3 billion. The company states customer migration to the NBN was a factor, coupled with increased market competition.

For the period, the telco added 235,000 retail mobile services – 130,000 postpaid handheld services, to 17.6 million.

454,000 nbn connections were added, nabbing Telstra a 51% market share

During the half, Telstra added about 57,000 retail bundled customers – one third of the bundles include entertainment packs.

Following its announcement earlier this month, Telstra booked an impairment charge of $273 million (against goodwill and non-current assets) for its 98% stake in video streaming business Ooyala.

Telstra first took control of Ooyala in 2014, and its $500 million investment has essentially been written down to zero.

Without Ooyala’s impact, company profit would have jumped to about 10%.

As a result, Telstra has cut its interim dividend to 11 cents (fully franked) – a notable 15.5 cents less than it was a year ago.

In August last year, the company announced a change to its dividend policy, in a bid to better combat competitors.

Despite this, the telco affirms it will distribute $1.3 billion to shareholders by March. It forecasts a 22 cent full-year dividend.

Telstra Chief Executive, Andy Penn, asserts despite market challenges, the company has largely performed well:

“The impact of the NBN, along with increased competition, highlights the importance of the up to $3 billion strategic investment program, and we are on track to deliver economic benefits from this of more than $500 million of earnings by FY21”.

Concerning its 2018 full year guidance, Telstra confirms income forecasts of $27.6 billion – $29.5 billion, and an EBITDA of $10.1 billion – $10.6 billion.

The company states it’s amidst a period of change, as it caters to the NBN, and moves towards 5G.

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