Telstra Shares Plunge After Dividend Cut
Telstra shares have fallen by over 8% to the lowest point in almost five years after the telco announced it will cut dividends by 30%.
As part of its earnings for the 2017 financial year, Telstra said it expects total dividends to drop from 31 cents per share to 22 cents in the 2018 financial year.
CEO Andy Penn said the telco is shifting from a payout ratio of 100% of underlying earnings to between 70-90%, but will also pass along 75% of the net one-off receipts it receives from the NBN. Penn also provided an update as to how the NBN rollout is expected to impact Telstra.
“We reported in May 2016 that the expected negative effect of the nbn rollout on Telstra’s EBITDA would be in the range of $2 − 3 billion,” Penn said.
“Given the latest outlook of nbn CVC charges, which we estimate will more than double over the coming years, we now expect the impact is likely to be at the top end of this range, around $3 billion.”
The telco reported a 33.8% drop in net profit to $3.9 billion linked to the sale of its stake in Chinese automotive site Autohome last year.
Underlying profit increased 1.1% to $3.9 billion, and total income was up by 4.3% on a year earlier to $28.2 billion.
Telstra said it added 676,000 NBN connections during the financial year for a total of 1,176,000 excluding satellite connections, giving it a 52% share of the market.
218,000 mobile customers and 132,000 fixed broadband customers were also added during the period.
Due to the “changing dynamics in the market”, potentially including the telco’s fall in mobile market share as well as TPG’s plans to build its own mobile network, Telstra is said it is planning to leverage its Belong brand for a new budget mobile offering.
More details about Belong Mobile will be given in the near future.