Telstra has taken a hit to its enterprise fixed business due to the declining use of some legacy offerings, taking away from an otherwise strong FY2023 for the telco.
In the year ended 30 June 2023, Telstra’s enterprise fixed business reported income of $3.6 billion, down 2.5 per cent from the previous year, due to declines from its data and connectivity (DAC) and network applications and services (NAS) units.
DAC income declined 16.2 per cent to $801 million due to competition, renewals and technology change, while also seeing a 10.6 per cent reduction in services in operation.
NAS income was hit by declines in calling applications as the business continues to shift to integrated video solutions, but strong professional services revenue offset the declines to report a 2.2 per cent increase in income to $2.8 billion.
Professional services revenue increased 23.5 per cent to $542 million due to one-off infrastructure builds on large contracts and Telstra Purple acquisitions (Alliance Automation and Aqura Technologies), while managed services revenue increased by 4.6 per cent to $772 million due to growing cybersecurity services and service management sales.
Cloud revenue also increased by 11.5 per cent to $311 million, while equipment sales revenue increased 3.8 per cent to $412 million.
The telco overall however posted income and profit growth due to a strong mobile business, as well as contributions from the infrastructure and international units.
Telstra reported income of $23.2 billion for the period, a 5.4 per cent increase year over year, and net profit after tax of $2.1 billion, up 13.1 per cent from last year.
Earnings per share was 16.7 cents, up 16 per cent year over year, while EBITDA was $7.9 billion, an 8.4 per cent increase.
T25 strategy on track
Telstra CEO Vicki Brady said the company's T25 strategy was on track overall, including its growth ambitions in underlying EBITDA and earnings per share.
"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,” Brady said.
“We remain disciplined on reducing our costs, particularly considering the external economic environment."
Brady added Telstra will reach the halfway point in delivering the T25 strategy, and that the response from customers indicate the telco was “on the right path”.
"We continue to see the positive impact of product simplification, digitisation, answering consumer and small business calls in Australia, and bringing our retail stores in house,” she said.
"Our Strategic Net Promoter Score increased four points during the year, Episode Net Promoter Score is at historic highs, and we achieved our strongest reputation result in 15 years. Australians are beginning to see a change in us, driven by improvements in customer experience, continued network leadership, and our strength in cyber security.”
Looking ahead, Brady said her top priority into FY2024 was lifting customer experience so the telco can achieve its growth ambitions.
"While our cost reduction ambition is being challenged by high inflation, we still expect to achieve the large majority of this by FY25."
"We remain absolutely committed to delivering our FY25 underlying EBITDA and EPS growth ambitions,” she said.
"I am very optimistic about the role we can play in Australia’s digital future."
"By investing to underpin the digital economy and bring better connectivity to regional and remote areas, we will create value for our customers, our shareholders, and for the nation."
Telstra expects to report income of between $22.8 to $24.8 billion and underlying EBITDA of between $8.2 to $8.4 billion for the 2024 financial year.
InfraCo stake sale called off
Despite the jump in profit for the fiscal 2023 year, Telstra shares dropped after the telco said it would not sell a stake in its InfraCo Fixed infrastructure arm.
"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," Vicki Brady said.
InfraCo Fixed contributed around 11 per cent to Telstra's total earnings, with a 4.1 per cent annual income increase to A$2.56 billion.
Brady added that Telstra has achieved its goals in establishing infrastructure arm InfraCo.
“We have created a strong digital infrastructure operator and are seeing strong customer demand for our infrastructure, while our customers’ needs and long‐term demands continue to evolve,” Brady said.
“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.”
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