Waning NBN payments hit Telstra’s financials

Waning NBN payments hit Telstra’s financials

Australia’s largest telco reported a 4.4 per cent year-on-year decline in revenue for the six-month period.

Andrew Penn (Telstra)

Andrew Penn (Telstra)

Credit: Telstra

Telstra has reported a year-on-year decline in revenue and income for the half year ending 31 December, with CEO Andy Penn pointing to the negative effects of a decline in National Broadband Network (NBN) payment receipts during the period.

Australia’s largest telco reported a 4.4 per cent year-on-year decline in revenue, or $481 million, for the six-month period, down to $10.5 billion. It also reported a 9.4 per cent decline in total income, representing a drop of $1.1 billion, to just under $10.9 billion.

Penn stressed that the 2022 financial year was pivotal for Telstra financially, as it saw the near final negative transitional effects of the NBN rollout in its reported results, but also the growing momentum in its underlying performance starting to show through.

“Our reported total income includes declines of around $450 million in one-off NBN receipts and around $200 million in NBN commercial works, while our underlying results demonstrate the benefits of our T22 strategy,” Penn said.

In 2011, NBN Co struck a deal with Telstra to rent infrastructure and pay for the disconnection and migration of customers to assist with NBN Co’s rollout of the NBN. As the rollout progressed, these payments have diminished.

“In addition to the impact of the NBN, the declines on a reported basis reflect the one-off gains last year, including the sale of our Velocity and South Brisbane exchange assets and the sale and lease back of our Pitt St exchange,” Penn added.

In addition to a decrease in total income, Telstra reported a decline in earnings before interest, tax, depreciation and amortisation (EBITDA), which came to $3.5 billion, down 14.8 per cent year-on-year.  

Net profit before tax (NPAT), meanwhile, decreased by 34 per cent to $0.7 billion, and earnings per share was down 35.9 per cent to 5.9 cents.

At the same time, underlying EBITDA increased 5.1 per cent to $3.5 billion, demonstrating what the company claimed was positive momentum in its core business, with mobiles performance reinforcing Telstra’s clear leadership in 5G.   

The telco also noted that the six months to December saw it make strong progress against its T22 strategy, with more than 80 per cent of metrics now achieved or on track to be delivered.

Penn said that Telstra’s 5G network was now more than twice the size of its next nearest competitor, with more than 77.5 per cent of the population covered and almost 2.8 million 5G devices connected to its mobile network. 

The company’s professional services revenue increased by 2.2 per cent to $185 million, driven by a renewed focus on large strategic contracts and digital transformation engagements by its managed services business, Telstra Purple.

Cloud applications revenue increased by 6.3 per cent, to $135 million, from partner cloud products, including Amazon Web Services (AWS) and Microsoft, enabling attachment to managed services, the telco noted.

At the same time, early progress against the company’s T25 plan has also started to make early progress against, even though, according to Penn, there was more to do to finish the job on T22.

T22 is Telstra’s strategy to simplify its operations and products, improving customer experience and reducing costs. The T25 plan, meanwhile, is Telstra’s strategy for growth. 

Earlier this month, Telstra moved to boost its Australian government cyber security standing with the impending launch of new services targeting the edge and detection and response capabilities.

The solutions, dubbed Sovereign SecureEdge and Cyber Detection and Response, have been built to meet the requirements of all levels of government – federal, state and local — including Infosec Registered Assessors Program (IRAP) assessment measures.

Both these solutions will be supplemented by a new specialist team at the telco.

Also this month, Telstra said it would invest $1.6 billion to lay the ground infrastructure for the "largest-scale" satellite deployment in Australia for communications company Viasat, and building the "largest inter-city fibre network" in the country.

To deliver both projects, Telstra will invest between $1.4 to $1.6 billion outside of its business-as-usual capital expenditure over the next five years, with up to 70 per cent of its total commitment spread across its T25 planning period.

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Tags NBNTelstranbn coAndy Penn

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