Telstra profit drops 40% as NBN hits hard

TELSTRA has reported a 40 per cent fall in full-year profit to $2.15 billion and flagged another earnings squeeze next year as construction of the national broadband network nears completion.

Profit for the 12 months to June 30 fell from $3.59 billion a year ago on $800 million in previously announced restructuring costs and $600 million in earnings lost to the government-owned NBN.

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The company cut its final dividend to 8.0 cents per share from 11 cents a year ago, with its full-year payout down to 16 cents from 22 cents in FY18.

The company said the NBN has absorbed about $1.7 billion of earnings since FY16 and it expects to lose as much again by the time customer migration is complete.

Telstra said earnings lost to the NBN will increase to between $800 million and $1 billion in FY20.

Trying to build the National Broadband Network on the cheap may have backfired for profitability and users alike.
Trying to build the National Broadband Network on the cheap may have backfired for profitability and users alike.

Nonetheless, chief executive Andy Penn said Telstra's $2.5 billion cost reduction program - announced in June 2018 - would leave it in good shape.

"Notwithstanding the intense competitive environment and the challenging structural dynamics of our industry, it is a year in which I believe we can start to see the turning point in the fortunes of the company from the changes we have embraced," Mr Penn said.

Telstra's total income for the year decreased by 3.6 per cent to $27.8 billion.

Mobile revenue increased by 1.6 per cent to $10.5 billion with growth across hardware, postpaid handheld, connected devices and wholesale, partly offset by prepaid handheld and mobile broadband declines.

Mobile retail customers services increased by 622,000, bringing the total to 18.3 million.

Fixed service revenue declined by 9.4 per cent to $5.2 billion due to NBN migration, competition and ongoing legacy decline.

The company said it had now made 6,000 of the 8,000 staff cuts announced in June last year as part of its T22 strategy, including removing three management layers so far.

NBN, RESTRUCTURING WEIGH ON TELSTRA

* Net profit down 40pct to $2.15bn

* Total income down 3.6pct to $27.8bn

* Final dividend down 3.0 cents to 8.0 cents, fully franked


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