Telstra dials up revenue and dividends

Chief executive Vicki Brady says the telco’s T25 strategy is on track despite some headwinds, after the company shed 500 staff last month.

Australia’s largest telco reported net profit after tax of $2.05bn, up 13.1 per cent year-on-year. Picture: NCA NewsWire / Luis Enrique Ascui

Telstra has delivered bumper revenue and dividends, with chief executive Vicki Brady declaring the telco’s T25 strategy is on track as profits surged past $2bn, while ruling out a sale of the prized $15bn InfraCo Fixed business unit.

In its full-year results for the 12 months to June 30, Australia’s largest telco on Thursday reported net profit after tax of $2.05bn, up 13.1 per cent year-on-year, and total income of $23.25bn, up 5.4 per cent. It lifted earnings before interest, taxation, depreciation and amortisation by 8.4 per cent to $7.8bn, in line with guidance and analyst expectations, and increased earnings per share by 16 per cent to 16.7c.

Telstra’s board resolved to pay a fully franked final dividend of 8.5c per share – the same as last year – bringing total dividends for the year to 17c, up 3 per cent. The telco’s shares fell on the result, down 2.8 per cent to $4.13 at market close.

Delivering her first full-year result as Telstra chief executive, Ms Brady said the telco’s mobile unit was performing strongly but its fixed enterprise segment faced headwinds. “Telstra’s T25 strategy was on track overall, including its growth ambitions in underlying EBITDA and EPS,” Ms Brady told shareholders.

“Our mobiles business remains central to our growth and continues to perform very strongly. Our infrastructure, international, consumer and small business (C&SB) fixed line and health businesses also grew ­earnings.

“At the same time, there are aspects of our enterprise fixed business that are experiencing headwinds. We remain disciplined on reducing our costs, particularly considering the external economic environment.”

Ms Brady said that Telstra would hold on to its infrastructure unit, InfraCo Fixed, after mulling a sale of part of its $15bn business. The telco in 2021 sold a non-controlling stake in its tower segment, Amplitel, for $2.8bn.

With the InfraCo decision Telstra is bucking the trend of infrastructure sell-offs across the telecommunications sector.

Telecoms infrastructure assets remain in strong demand, with Vocus to pay $6.3bn for TPG Telecom’s fibre networks in a deal announced this month.

“After thoroughly examining alternatives, we have concluded that the greatest value to be created for shareholders is by maintaining the current ownership structure of InfraCo Fixed, for at least the medium term,” CEO Vicki Brady told shareholders.

Telstra CEO Vicki Brady. Picture: NCA NewsWire / Luis Ascui

“We are seeing strong customer demand for our infrastructure, while customer needs and long-term demand continue to evolve. This is being shaped by the shift to the cloud and rapid AI adoption driving data centre and edge requirements, along with needs for domestic fibre and undersea cable.

“Maintaining the current ownership structure provides alignment across the whole of Telstra to best capture and maximise long-term value.”

Telstra earlier this year raised the prices of its postpaid mobile plans by 7 per cent – about $4 a month – in line with inflation but slightly above analyst expectations, after also hiking prices for its prepaid customers by 20 per cent.

Income from Telstra’s mobile business grew by 8.3 per cent for the year to $10.26bn, while postpaid handheld services revenue lifted 6.9 per cent to $5.39bn.

“I think the thing that I step back and look at with mobile is it just continues to be incredibly important to our customers, whether it’s in their daily lives or in business,” Ms Brady said. “We’ve seen data growth on our mobile network over the last year at around 35 per cent and we’re expecting that to continue.

“That importance of mobile and how much value customers place on it I think puts us in a good position, and obviously continuing in our leadership position from a network point of view is absolutely core to our strategy.”

In its FY24 guidance Telstra is expecting total income of between $22.8bn and $24.8bn, underlying EBITDA of $8.2 to $8.4bn, capex of between $3.6bn and $3.7bn and free cash flow after lease payments of $2.8bn to $3.2bn.

As The Australian first reported last month, Telstra axed nearly 500 roles, its first major round of job cuts under Ms Brady, shedding staff across its enterprise unit.

The cuts formed part of Telstra’s bid to slash $500m in fixed costs under its T25 strategic plan, which was initiated by former chief executive Andy Penn. The company added 2500 full-time employees in the year.

“We remain disciplined on reducing our costs, particularly considering the external economic environment,” Ms Brady said

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The results come after Telstra this week announced it would not seek a judicial review of the Australian Competition Tribunal’s decision to block its proposed 10-year $1.8bn regional network-sharing deal with TPG.

Ms Brady said Telstra was keeping its options open with regards to a rejigged network sharing deal with TPG.

“In terms of network sharing, yes, we announced this week we would not be appealing the decision on the TPG MOCN (multi-operate core network) deal. As we demonstrated through that deal, we think there are innovative ways to share infrastructure in the country that can get better outcomes for regional Australia and also deliver the right commercial outcomes for the industry players now,” Ms Brady said.

Josh Gilbert, market analyst at eToro, said it was a successful year for the telco.

“This solid result comes despite inflation driving costs higher, with the price of labour increasing in the full year. CEO Vicki Brady has done a stellar job in implementing the business’s T25 plan, first announced in late 2021,” Mr Gilbert said, but added:

“It certainly won’t all be one way for Telstra in FY24.”