Telstra shares surge higher amid bumper dividend, profit

Investors have welcomed a bumper dividend and profit lift from telco giant Telstra, which announced plans to splash $800 million on upgrading its 5G mobile network.

In half-year results that beat analyst expectations, Telstra on Thursday said its net profit rose 7.1 per cent to $1.12 billion in the six months to December 31, while earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 6 per cent to $4.25 billion.

The company hiked its dividend by 5.6 per cent. It will pay an interim dividend of 9.5 cents per share, fully franked, on March 28. Telstra shares surged on the results, jumping 5.5 per cent higher to $4.13 at 12.30pm AEDT.

Telstra chief executive Vicki Brady said demand for the company’s mobile network had tripled over the past five years.Credit: Ben Symons

Telstra said it will capitalise on momentum in its mobiles business, investing in its 5G network to include new AI features, thanks to a partnership with global networking giant Ericsson.

Chief executive Vicki Brady said demand for the company’s mobile network had tripled over the past five years, which necessitated a “step change” in how connectivity is delivered. She said the investment would allow for new AI network capabilities including ‘self-healing’ - the ability to perceive and rectify faults automatically - and AI-powered capacity management.

“Over the next four years, we will increase our mobile investment by $800 million to extend our leadership and deliver customers the most advanced, resilient and reliable 5G mobile network in the country,” she said in a statement to the ASX.

“This will be delivered within business-as-usual capex by directing a larger portion of overall capex to our mobile network.”

She said Telstra’s mobile network already covers more than double the area of Optus’ and around three times that of Vodafone and TPG.

Telstra continued to add mobile subscribers to its network, despite hiking prices in 2024 for both prepaid and postpaid customers.

“This growth was driven by more people choosing our network, with 119,000 net new mobile handheld customers and average revenue per customer growth. Mobile services revenue grew by 3.1 per cent,” Brady said.

Last May, Telstra announced plans to cull 9 per cent of its workforce - up to 2800 jobs - citing rising inflation and energy costs as well as tough market conditions. Telstra executives on Thursday said those job cuts had been completed, which had helped reduce operating expenses for the half. They did not rule out further cuts.

The results came as data released by the telecommunications ombudsman on Thursday showed customer complaints soared over the past quarter, with the 3G network shutdown having a significant impact on the reliability of mobile services for many customers.

“I want to acknowledge there are a small number of customers who have faced issues since the closure,” Brady said on Thursday. “We are working with them to identify the cause and help them with their connectivity. This includes launching a dedicated 3G help line to address customer and device-related questions.”

Telstra also announced a $750 million on-market share buyback, a plan Brady said was “consistent with Telstra’s capital management framework and demonstrated board and management confidence in Telstra’s financial strength and outlook”.

She said Telstra remained on track to achieve its forecasts for the 2025 financial year, targeting underlying EBITDA of between $8.5 billion and $8.7 billion.

“As we [...] look towards our new strategy, our increased interim dividend and share buy-back reflect the confidence we have in the business now and into the future,” she said.

Analysts said the results came in slightly above expectations, and that the dividend bump rewarded shareholders for their patience.

“Telstra’s dividend has been its saving grace in recent years given the share price has barely budged,” eToro market analyst Josh Gilbert said.

“Cost-cutting has been a key to Telstra’s success, but these cuts have been largely about improving operational efficiencies.”

Consumers are fickle and often chase the best deal, Gilbert said, but Telstra’s efforts to maintain the best and widest coverage in the country have been a significant drawcard for retaining customers.

“If Telstra doesn’t invest in its network, it will get left behind, particularly with the AI boom, so this investment is a good sign,” he said. While the telco is leading the charge in 5G and infrastructure, staying on top means constant innovation and sharper strategies.

“Telecommunications is a capital-intensive business,” he said.

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