Telstra's Full-Year Profit Falls 8pc to $3.6 Billion as NBN Rollout Erodes Business

Telstra has seen its full-year profit fall 8.4 per cent to $3.6 billion as the impact of the NBN rollout and competition for mobile customers erode the company's bottom line.

Despite those pressures the company managed to keep sales revenues flat at $26 billion.

The results were ahead of market expectations.

Telstra chief executive Andy Penn said the impact of things like the NBN was a worldwide phenomenon and was having an enormous impact on business.

"Wholesale prices have risen, meaning we and other industry participants are facing a fixed-line market where reseller margins are rapidly reducing," he said.

"At the same time, competition in the mobile market is increasing with the expected entrance of a fourth mobile network operator."

As flagged earlier, Telstra cut its full-year dividend to 22 cents, from 31 cents last year.

Mr Penn said the challenging environment of the past 12 months showed little sign of easing.

"These competitive pressures are playing out in our financial performance and we expect the challenging trading conditions experienced in 2018 to continue in 2019," he said.

Telstra shrinking

Telstra has accelerated its cost-cutting program to $2.5 billion by 2022, with $1.5 billion worth of costs to be stripped from the business in the next two years.

Central to that program was the previously announced shedding of 8,000 jobs over the next three years, including removing two levels of management.

The number of plans on offer will be stripped down from an unwieldy 1,800 to just 20.

That slimming down will incur restructuring costs of $600 million this year.

Telstra also intends to sell around $2 billion worth of property and assets in its campaign of shrinking to growth.

It has announced plans to split the company in two, creating a separate company based on its $11 billion infrastructure assets.

"The organisation we are becoming will look vastly different to the one we are today," he said.

"Our workforce will be a smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change."

Challenges

Mr Penn said Telstra had so far absorbed $1.4 billion of the $3 billion revenue "black hole" created by the NBN broadband roll out crunching fixed line earnings which on a pre-tax basis are down almost 35 per cent.

Despite the challenges, Telstra did manages to build its customer base, adding 340,000 mobile users, 135,000 retail bundles and 230,000 wholesale mobile services to business.

Other key results included:

Fixed line revenue -9pc to $5.8bn
Mobile revenue +0.4pc to $10.1bn
Network Application Services revenue +8.6pc to $3.6bn
NBN +770,000 customers to 1.95 million or 51pc of the market

The market welcomed the fact there were no more nasty surprises and the results were slightly ahead of forecasts with shares jumping 2.8 per cent to $2.97 in early trade (10:30am AEST).

Source: abc