Australian operator Telstra reported total income from continuing operations of AUD 28.2 billion for financial year 2017, an increase of 4.3 percent year-on-year. EBITDA increased 2.0 percent to AUD 10.7 billion, while basic earnings per share on a reported basis increased 2.8 percent to 32.5 cents. On a guidance basis, Telstra said it increased total Income by 4.3 percent and EBITDA by 4.5 percent. Excluding the proceeds from the FY16 sale of Autohome, net profit increased 1.1 percent on a reported basis from continuing operations.
Telstra’s board announced a dividend of 15.5 cents per share, bringing the total dividend for the financial year to 31.0 cents per share. However, the company said that the dividend would fall to an estimated 28 cents in the new fiscal year, as it adopts a new policy of paying out just 70-90 percent of underlying earnings rather than nearly 100 percent. To compensate, the company said it would give up to 75 percent of one-off income received from Australia's transition to the NBN to shareholders as special dividends as well as consider share buybacks.
Telstra said it also expects the impact from the NBN on the company's EBITDA to be at the high end of its previous forecast of AUD 2-3 billion. The company reiterated its intention to step up investment in new services to make up for the lost profits and to face off newcomers in both the fixed and mobile markets. It's planning up to AUD 3 billion in additional capex over the three years to FY19, bringing total investment in the period to AUD 15 billion. This should result in over AUD 500 million in additional EBITDA by FY21.
In the past year, Telstra already increased capex excluding spectrum to AUD 4.7 billion from AUD 4.2 billion the previous year. For the fiscal year to June 2018, it targets capex at around 18 percent of revenue, similar to the past year, while forecasting that the ratio should drop to around 14 percent from FY20 after it completes the three-year investment programme.
In FY18, Telstra expects income to increase slightly to AUD 28.3-30.2 billion and EBITDA flat to higher at AUD 10.7-11.2 billion. This includes incremental restructuring costs of AUD 200-300 million to support the accelerated productivity progamme, which now targets savings of AUD 1 billion by FY20, a year earlier than previous forecast, plus an additional AUD 500 million by FY22.
The operator extended its mobile network during the year with over 2,200 mobile sites either built or upgraded to 4GX, and 4G coverage was extended to 99 percent of the population. The Telstra Air Network currently has more than 1.1 million hotspots, with the number of activated customers on Telstra Air increasing to more than 2 million.
Telstra added 218,000 domestic retail mobile customers during the year, while ARPU in the lucrative postpaid phone market declined, leading to a 4.8 percent drop in annual mobile service revenue. Telstra said mobile results started to stabilise in the second half of the year, but the company also announced it's expanding its low-cost Belong brand from the fixed to the mobile market, ahead of TPG entering the market as a new mobile operator. Further details on the Belong mobile launch will be announced "soon", the company said.
In the fixed market, Telstra added 132,000 domestic retail fixed broadband customers over the past year. NBN connections grew by 676,000 to 1.17 million, bringing total market share (excluding satellite) to 52 percent, the company said. However, fixed revenues were down 4.7 percent due to continued pressure in the voice market and lower wholesale revenue, and the fixed EBITDA margin dropped to 48 percent from 51 percent a year ago due to upfront and network costs for the NBN migration.
