Telstra’s payouts to shareholders are getting smaller as the NBN and rising competition eats away at the giant’s earnings and revenue base.
The telco yesterday revealed that it will pay a fully-franked interim dividend of 8c a share for the December half, including an ordinary dividend of 5c and a special dividend of 3c.
A year ago it paid 11 cents a share in total – an interim of 7.5 cents a share and a special of 3.5 cents. The year before it paid 15 cents a share, so the total size of the interim has almost halved in two years thanks to rising levels of competition in mobiles and the inroads the NBN is making.
That has seen the company conserve cash ahead to help finance the restructuring of the business and the start-up of its 5G mobile network later this year.
The telco’s net profit on a reported basis fell 27.4% to $1.2 billion compared to the same period in 2018. Total revenue fell 4.1% to $13.8 billion and earnings (before interest, tax, depreciation, and amortisation) dropped 16.4% to $4.3 billion.
But a bright spot was a solid 2.4% rise in revenue in its biggest and most important segment – its mobile business – to $5.29 billion.
That’s where the new ultra-fast 5G network is located and it had good news recently from the decision in January by rival TPG not to build its own mobile network and to continue to proceed with a merger with another rival, Vodafone.
“While today’s financial results show parts of our business continue to face short-term challenges, there are positive signs particularly with the significant increase in retail postpaid mobile services,” Mr. Penn said in a statement.
“Telstra’s circumstances today are very different from what they were before the NBN…. that part of our business – the revenue and value – is being transferred to the NBN and that is reflected in our income, profit, and dividend.”
“Importantly, we remain very positive about Telstra’s prospects for the future. Demand for telco products and services continues to grow and telecommunications infrastructure is only going to increase in importance over the next decade,” he said.
In the first half of 2019 fixed costs were down by 4.2% at $162 million as the company’s cost-cutting plans got underway, including axing thousands of jobs.
The half-yearly earnings report were in-line with the company’s forecasts and showed “solid performance” in customer numbers. The results were broadly in line with analyst consensus.
“The results were impacted by the further roll-out of the NBN network, with approximately 55 percent of premises now connected … While the results show parts of our business continue to face short term challenges, there are positive signs particularly with the significant increase in retail postpaid mobile services,” Telstra said.
For all the talk and confidence, investors gave the results a thumbs down. The shares fell 6.5% just after the opening of ASX trading yesterday (the results were out well before the bell) and ended the day down 2.1% at $3.14.