NBN Delays Force Telstra Into Downgrade

By Glenn Dyer | More Articles by Glenn Dyer

The dividend is safe, but not Telstra’s bottom line after the telco slashed its expected 2017-18 revenues by a huge $700 million, with pre tax earnings slashed by $600 million.

Telstra blamed the impact of NBN delays for millions of broadband consumers and a re-issued corporate plan in a filing with the ASX on Friday morning.

Its total income was expected to be within $28.3 billion and $30.2 billion for 2018 – this has now been revised to a range of $27.6 billion to $29.5 billion.

There were no changes to the 22 cent dividend which was slashed earlier this year from the 31 cents a share paid for 2016-17. The news will see Telstra shares come under more pressure on Friday – the shares ended November at $3.42, down 3.1% for the month and 33% for the year to date.

Investors had been expecting Telstra to be hit by the NBN delays that were revealed on Monday by NBN chief executive Bill Morrow.

The delays will impact those intending to connect to the national broadband network through their existing pay tv or internet cables.

This could leave many waiting for up to nine months while technical issues are sorted out for customers on the hybrid fibre coaxial (HFC) network (which was the basis of Telstra’s initial pay TV roll out with Foxtel).

The delay specifically affects Telstra, whose previous guidance had been on the assumption that the rollout would be in line with NBN’s 2017 corporate plan.

Telstra’s earnings before interest, tax, depreciation and amortisation (EBITDA) was revised down $600 million, from a $10.7 billion to $11.2 billion guidance to $10.1 billion to $10.6 billion.

The revised guidance also takes into account a re-issued NBN Corporate Plan 2018 in August – which reduced the number of brownfields Ready For Service premises and a cut of 200,000 brownfield activations compared to the previous year’s plan.

Telstra said its free cash flow would be cut by around $200 million as well.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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