Telstra lifts interim dividend by 6.3pc as total income climbs to $11.6bn

Telstra gained tens of thousands of new mobile customers as a result of the massive Optus data breach but analysts say it could have capitalised even further if it hadn’t increased prices.

Telstra gained tens of thousands of new mobile customers as a result of the massive Optus data breach, the nation’s largest telco revealed on Thursday, but analysts say the company could have capitalised even further if it hadn’t increased prices.

In her first results as chief executive, Vicki Brady said Telstra would pay a higher interim dividend after profit jumped 26 per cent to $934m, driven by a strong set of mobile numbers.

In results that were largely in line with expectations, it posted interim underlying earnings before interest, taxes, depreciation and amortisation of $3.86bn for the half, lower than its guidance of $3.89bn.

Telstra will pay a dividend of 8.5c a share on March 31, up 6.3 per cent year-on-year and in line with the second half of last financial year.

Investors welcomed the result, sending shares up 1.9 per cent, or 8c, to $4.22.

Telstra said it gained 68,000 postpaid subscribers, many of whom switched from rival Optus as a result of its data breach. Telstra this week launched a flashy new ad campaign aimed at highlighting its commitment to cyber security and safety.

“We estimate that the cyber incident at Optus impacted our net adds in the order of positive low-to-mid tens of thousands, split across consumer and small business and enterprise postpaid, prepaid, and wholesale,” Telstra chief financial officer Michael Ackland said. “Port-ins from Optus have now largely normalised.”

Mobiles revenue was up 9.5 per cent at $5.1bn in the telco’s interim results.

Optus previously revealed that its churn rate jumped 50 per cent higher than normal in the wake of the breach, which affected 10 million people.

“We have definitely seen an increase in churn after the cyber attack as well as a reduction in the number of new customers,” Optus CEO Kelly Bayer Rosmarin said in November. “However, that impact has been much less pronounced than it could have been given the size of the number of customers affected.”

Telstra says inflation is having some impact but it has levers to pull. Picture: NCA Newswire / Gaye Gerard

Natalie Tam, deputy head of Australian equities at abrdn, said there was some disappointment in the market that Telstra was unable to take more advantage of the breach.

“I think it probably reflects some of the churn [away from Telstra] that was triggered by the price increases that Telstra brought on earlier in the half. And perhaps also the market was overestimating the amount of churn that the Optus data breach would trigger,” Ms Tam said.

“The data breach was obviously a material event but for most consumers it was an annoyance, rather than a churn event.”

In telecom terms, churn refers to the percentage of subscribers shifting to a rival provider.

Ms Brady said Telstra achieved strong growth in the half and made good early progress on its T25 strategy, as well as finalising its legal restructure. The telco is set to lift mobile prices further in July as part of a yearly pricing ­review, and Ms Brady flagged likely price rises to the company’s NBN plans as well.

Telstra’s total income increased 6.4 per cent to $11.6bn for the six months to December 31, with full-year guidance reaffirmed at between $23bn and $25bn, but it said it would probably come in at the lower end due to mobile hardware and fixed-product revenues being lower than expected. It said customers were buying cheaper handsets and holding onto them for longer.

“On the back of our continued growth, the board resolved to pay a fully franked interim dividend of 8.5c per share, representing a 6.3 per cent increase on the prior corresponding period, and in line with the second half of last financial year,” Ms Brady said.

“The interim dividend is consistent with our policy to maximise the fully franked dividend and seek to grow it over time.”

She lauded the company’s T25 strategy, which was launched under predecessor Andy Penn, and reiterated ambitions to cut $500m in costs through to 2025.

“We are a growing business with a lot to be excited about in our future, and our T25 strategy provides a clear road map to get us there,” she said.

Telstra also said former managing director of investment banking at Investec Bank, Maxine Brenner, would join the board on Friday. Ms Brenner is currently on the board of Woolworths, Qantas and Origin Energy.

The company’s bottom line was buoyed by last year’s acquisition of Digicel Pacific, which has been widely viewed as a political move to counter the rising regional influence of China.

The telco’s international segment now accounts for 10 per cent of its entire earnings base. It lifted international revenues by 7 per cent and earnings by 9 per cent.

Ms Brady said she expected inflationary pressures to continue into the next half of the fin­ancial year, which would have an impact on the financial performance of the telco’s fixed-line enterprise services.

Enterprise data and connectivity declined 14.4 per cent, which she said was due to “ongoing disruption from technology change and competition”.

“On cost, while inflation is having an impact, we continue to have cost mitigants and revenue levers, and remain committed to our FY25 $500m cost-out ambition,” Ms Brady said.

“I also understand the current economic climate creates challenges for our customers. The changes we have made in recent years to remove lock-in contracts and move to a multibrand strategy mean we can continue to provide customers with flexibility and options to ensure they can choose plans they can afford.”

Ms Brady said her first six months in Telstra’s top job was an intense but exciting period.

“I think with any new job when you step into it, it’s doing things the first time in the new role,” she said. “If I take today as an example, yes I’ve done results before sitting in the CFO chair, but this is the first time I’ve delivered results sitting in the CEO chair and this is a new world for me … It’s exciting and new.”

Josh Gilbert, eToro’s markets analyst, said the results represented a “great start” to Ms Brady’s regime.

“Ms Brady, one of just 14 female chief executives among Australia’s top 200 companies, served as CFO before taking over. She reaffirmed the group’s T25 strategy is the right strategy, which was the backbone of Telstra’s strong results,” he said.