Increased competition, NBN rollout hit Telstra profits

Telstra CEO sees progress on new strategy

Telstra has continued to build its mobile and fixed broadband customer base but the company’s full-year results reveal the impact on the telco of the continuing migration to the National Broadband Network and a competition-driven decrease in average revenue per user (ARPU).

Telstra enjoyed a 3 per cent increase in total income to $29 billion for the 12 months to 30 June, but reported today that net profit after tax dropped 8.9 per cent to $3.5 billion in FY18.

Earnings before interest, tax, depreciation and amortisation (EBITDA) for continuing operations dropped 5.2 per cent to $10.1 billion.

During the year the company added 342,000 retail mobile subscribers — for a total of 17.7 million — and 88,000 retail fixed broadband customers, for a fixed customer base of 3.6 million.

Telstra has previously indicated that the NBN rollout is expected to deliver a $3 billion blow to its EBITDA.

Facing increased competitive pressure, including the imminent debut of TPG’s new mobile network, Penn in June announced that Telstra would embark on a new strategy.

The ‘Telstra2022’ strategy — or T22 — will see the net loss of some 8000 jobs. It has four key pillars: Streamlining the telco’s product lineup, setting up a new business (‘InfraCo’) to take control of most of Telstra’s fixed-line infrastructure, continuing to cut costs, and simplifying the company’s structure.

The telco reported today that it had cut underlying core fixed costs by 7 per cent ($480 million).

Last month Penn revealed further details of the implementation of T22, unveiling a new structure for the company. That new structure and operating model will be fully operational from 1 October.

The CEO today said that Telstra has made strong early progress on T22, including unveiling a new mobile product line-up. Penn said Telstra is preparing to unveil in October its next “product milestone”, which will allow customers to create custom home and mobile packages.

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