Telstra Shares Up 6% Despite Profit Slump
UPDATE – Shares in Telstra have soared 6.4% to $3.08 after midday, following news the telco intends to revamp its broadband and entertainment packages, after posting a full-year profit slump.
Telstra CEO, Andy Penn, has forecast further “challenges” ahead, posting a 8.9% drop in full-year net profit – to $3.529 billion – driven by high NBN costs and intense mobile competition.
For the full-year, fixed revenue dived 9.2%, whilst mobile revenue slipped 0.4%.
Despite the drop, Telstra asserts results are “in line with guidance”, posting “strong” subscriber growth especially in the second-half of the year.
During the year, the telco added 88,000 retail fixed broadband customers, 135,000 retail bundles and 342,000 retail customers.
Full-year total income climbed 3% to $29 billion, whilst revenue has remained largely flat.
In a published investor letter, Penn and Chairman John Mullen forecast mobile competition to further mount, following the entry of TPG Telecom this year.
Operating in times of “enormous challenge and change”, the telco forecasts 2019 income to slip between $26.5 billion and $28.4 billion.
For the full-year, mobile revenue climbed 0.4% to $10.14 million, with postpaid handheld retail customers jumping 304,000 to 7.9 million.
Fixed line revenue slumped 9.2% to $5.8 million – impaired by nbn migration – notching 3.6 million total retail fixed data customers.
Retail bundles jumped by 135,000, following the launch of the new Telstra TV in October last year, and revamped Unlimited Data bundles.
The telco has notched 3.1 million customers on bundled plans – i.e. 91% of its retail fixed data customer base.
Following its ‘Telstra 2022’ re-structure in June, underlying core fixed costs have dived 7% [$480 million].
The telco forecasts revenue to further constrict, following costs from the NBN roll-out, fixed line margin reductions and increased mobile competition.
“These factors have influenced our performance this year and underpinned our decision to take bolder steps to transform the business through our new Telstra strategy,” Telstra asserts.
“…challenging trading conditions are expected to continue in FY19, including ongoing pressure on ARPU [average revenue per user] and further negative impact of the nbn network roll-out on our underlying earnings,” claims Penn.
In June, Telstra announced a major company re-structure, seeking to slash over a billion in costs, and cull a quarter of its workforce by 2022.Last month, Telstra revealed a major management overhaul, losing several senior executives such as tech strategy boss, Stephen Elop, Chief Financial Officer, Warwick Bray, media unit head, Joe Pollard and wholesale business boss, Will Irving.
Telstra claims it’s already “well into the execution phase” of its new strategy, building on momentum provided by a ~$3 billion strategic investment in networks and digitisation.
The telco has declared a fully franked final dividend of 11 cents/share – 7.5 cents final ordinary dividend & 3.5 cents special dividend – with total dividend for 2018 notching 22 cents/share.
Telstra asserts its retained NBN market leadership, notching a total of 1,946,000 nbn connections – up 770,000.
Excluding satellite, Telstra’s nbn market share currently rests around 51%.
The company claims innovation and tech investments have already birthed fruit – e.g. landing first place in Netflix’s July Speed Index, whilst ranking Ookla’s fastest fixed and mobile network in Q1-Q2 2018.
After turning on 5G in the Gold Coast yesterday, Telstra asserts it’s also on track for commercial roll-out.