Telstra takes $1.2b hit to revenue due to phone sales decline, NBN costs

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Telstra takes $1.2b hit to revenue due to phone sales decline, NBN costs

Due to decline in hardware sales and ongoing NBN migration costs.

Telstra has taken a $1.2 billion hit to its half year FY2021 revenue after posting declines across all its business segments.

In the half year ended 31 December 2021, the telco posted revenue of $11 billion, a 9.7 percent decline year over year from $12.2 billion. EBITDA declined 14.7 percent from $4.8 billion to $4.1 billion, while profit also declined 2.2 percent to $1.13 billion.

Contributing to the slowdowns were revenue declines across every business segment, with fixed wholesale and mobile taking the biggest hits for the period.

Fixed wholesale reported a 19 percent decline to $770 million due to costs related to the ongoing NBN migration, partly offset by growth from products like Telstra fibre.

Mobile declined 12 percent to $4.7 billion despite adding 80,000 more active services, after taking a $500 million hit from lower hardware sales and $150 million in lost revenue from international roaming.

Fixed consumer and small business (C&SB), global and fixed enterprise segments also declined by 7.5 percent, 10.8 percent and 6.4 percent, respectively.

Despite the declines, chief executive Andrew Penn said Telstra’s finances are at a turning point as it anticipates growth in underlying EBITDA.

“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,” Penn said.

“We responded strongly to the financial headwinds created by the nbn through our T22 strategy. This strategy is transforming Telstra while balancing the needs of our customers, our employees and our shareholders. We are now less than 18 months from completing T22. We have achieved an extraordinary amount and Telstra today is a leaner, more responsive, and more agile company than it has ever been.”

Penn added that the telco is in a strong position to grow thanks to investments in innovation and technology, digitisation and networks, improving customer experience and capital management.

“To ensure our future success, we must recognise this moment for what it is – the time to be bold and seize the opportunities we have been patiently building towards. There is a lot of work ahead of us, but I remain confident we can achieve our financial ambitions,” he said.

Penn said the T22 strategy has been on track but said there was still work to be done.

“More than 80 per cent of milestones are now delivered or on track to be delivered. Our discipline in delivering T22 has brought enormous change for Telstra which is supporting the turnaround of the company,” he said.

“Having said that, the hardest part of any transformation is often seeing it through to the end and we have more to do in customer experience in particular.”

Telstra also provided an update on the planned restructuring announced in November last year. Penn said the company had “significantly progressed” in establishing InfraCo Towers as a separate operating business and is expected to be completed at the end of FY2021.

“We plan to commence the process for external strategic investment into InfraCo Towers early in the first quarter of FY22, with binding offers to be submitted by the second quarter of FY22,” Penn said.

“We are undertaking significant verification and due diligence on our towers and property, appointed key members of the management team and advisors, and preparation work is well advanced to meet our timetable.”

Penn added that “significant progress” has been made towards finalising the inter-company agreements between ServeCo and InfraCo Towers, the redesign of processes and implementation of new tower asset management systems.

Looking ahead, Telstra updated its financial guidance for the full FY2021. Income guidance has been reduced from between $23.2 billion - $25.1 billion to between $22.6 billion - $23.2 billion due to low-margin hardware and other equipment sales.

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