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Telstra takes on shifting market and comes out on top

Telstra released its half-year results for the financial year of 2018, showing increased subscriber numbers on mobile and fixed plans, a reduction in underlying core fixed costs and progress being made under its strategic investment program. 

On a reported basis, including the Ooyala impairment, total income was up 5.9%, EBITDA was down 2.5%, NPAT was down 5.8% and basic EPS was down 3.4%. 

On a guidance basis, total income was up 5.4% and EBITDA was up 2.4%. 

As announced on 2 February 2018, Telstra has made a non-cash impairment of $273 million and written down the carrying value of Ooyala, its US-based intelligent video business, to zero. 

Excluding this impairment, NPAT was up 9.55% and basic EPS was up 12.2%.

The Board has resolved to pay a total fully franked interim dividend of 11 cents per share, comprising an interim ordinary dividend of 7.5 cents per share and an interim special dividend of 3.5 cents per share, consistent with Telstra’s revised dividend policy and FY18 guidance.

The interim ordinary dividend represents a 71% payout ratio on underlying earnings excluding impairment and the interim special dividend a 58% payout ratio on the net one-off NBN receipts in the half. 

The interim dividend, to be paid on 29 March 2018 will distribute $1.3 billion to shareholders. 

Telstra CEO Andrew Penn says it was operating within a significant period of change, including migration to the NBN, competitive challenges, accelerating the pace of technological change and preparation for the transition to 5G.

Penn states, “Within that environment, we are pleased to have delivered a solid result in line with guidance for this half.

“We are in one of the most dynamic periods the company has faced and need to increase our level of intensity.”

“We are stepping up how we aggressively compete in the market, particularly leveraging our multi-brand strategy including Telstra, Belong, Boost and Telstra Wholesale.”

Until the end of December, Telstra had invested approximately $1.4 billion of additional capex or approximately half of the up to $3 billion in its strategic investment program. 

This included $1.3 billion on networks and $100 million on digitisation.

Penn continues, “We have upgraded our core backbone infrastructure in Australia to enable the support of an up to five times increase in capacity to meet future customer demand and we’ve improved our resilience.

“Our next-generation optical transport network has already been deployed on routes between five capital cities.”

Telstra expects an income of $27.6 to $29.5 billion and EBITDA of $10.1 to $10.6 billion. 

Capital expenditure is expected to be between $4.4 to $4.8 billion or approximately 18% capex to sales and free cash flow is expected to be in the range of $4.2 to $4.7 billion.

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