Telstra Announces Double-Digit Decline in Earnings

Telstra continues its battle to cope with COVID, the rapidly changing marketplace and competition, as well as the NBN.

Its December quarter results on Thursday revealed a double-digit decline in underlying earnings and a fall in revenue of the same size.

Telstra said its revenue fell 10.4% to $12 billion in the December half, while net profit dipped by 2.2% to $1.1 billion.

The company took a hit of around $170 million from COVID in the half and is looking for that cost to fall as vaccinations are rolled out.

But despite that bad news, shareholders will receive an interim of 8 cents a share and CEO Andy Penn assured shareholders they would receive the same amount for the second half.

He said the company was looking for a rise in earnings before interest, tax, depreciation and amortisation in the June half year and the company expects full-year underlying earnings before interest tax depreciation and amortisation in the range of $6.6 billion to $6.9 billion.

Mr Penn also indicated that company’s core but wounded mobile division would return to growth by the end of the financial year.

Mr Penn said the company was looking for external investors for its recently separated tower company (which will generate more cash and allow the prospect down the track of a spin off or IPO).

“After a decade of disruption following the creation of the nbn, and with its rollout now declared complete, we can clearly see the path to underlying growth ahead of us,” Mr Penn said in a statement filed with the ASX on Thursday.

The company said underlying earnings before interest tax depreciation and amortisation fell 14.2% to $3.3 billion over the half, due to the large payments to NBN Co and the extra costs from the coronavirus pandemic, which among other issues caused declines in international roaming revenues and additional expenses for customer support.

The pandemic also saw Telstra add $100 million in costs for pausing its job cuts of 1,400 positions. Those cuts were restarted last week and another 800 positions will go as well by the end of this year.

The result follows an announcement in November that Telstra’s group of companies would be split into three separate entities – InfraCo Fixed, InfraCo Towers and Serve Co.

Mr Penn said a search for external investors for the tower division would take place in early financial year 2022. No doubt the usual flock of wannabees will appear – led by a flock of super funds.

Now that a Macquarie offshoot wants to buy rival Telsco and cable group, Vocus, will the bank rule itself out of any attempt to snuggle up to Telstra.



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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