Telstra sheds $345 million in profits in one of its toughest years yet

Telstra has managed to add another $837 million in revenue in what could be its most challenging year in its history as earnings and profits continued to slide.

Total revenue was up 3 percent to $29 billion for the 2018 financial year ending 30 June. However, earnings were down 5.2 percent to $10.1 billion, while net profit dropped 8.9 percent to $3.5 billion.

Once again, chief executive Andy Penn reiterated that the soft results were caused by further rollout of the NBN and lower average revenue per user (ARPU).

Much of Telstra’s year has been focused on the Telstra2022 strategy, a wide-sweeping organisational structure that will see the telco attempt to simplify its organisational structure, reduce costs and improve customer experience in order to plug the $3 billion earnings hole that will be left in the wake of the NBN’s construction.

Part of the strategy saw Telstra spin out its network infrastructure assets into a separate company dubbed Telstra InfraCo effective from 1 July. Telstra will provide a detailed analysis of Telstra InfraCo’s performance in the first half of FY19.

The plan will also see up to 9500 jobs slashed as the company tries to flatten its organisational structure and shift its focus towards digital services.

Penn noted that Telstra’s traditional mobile business remained strong, with revenue growing 0.4 percent to $10.1 million and adding another 342,000 retail mobile customers.

“Despite this, the challenging trading conditions are expected to continue in FY19, including ongoing pressure on ARPU and further negative impact of the NBN network rollout on our underlying earnings,” Penn said.

“While it is less than two months since we presented our new strategy, we are well into the execution phase, building on the momentum provided by our up to $3 billion strategic investment in networks for the future and digitising the company.”

Telstra’s Network Applicants and Services is typically one of the best performing segments in the company, and FY18 was no different. NAS revenue grew 8.6 percent to $3.6 billion, faster than any other product category.

The NAS business comprises managed network services up 1.8 percent, unified communications up 1.1 percent, cloud services up 14.4 percent and industry solutions up 11 percent. It also includes integrated services, which grew 39.5 percent off the back of growth from Telstra’s professional services arm.

Telstra Enterprise revenue was up 1.7 percent to $8.2 million thanks to the strong NAS performance, but was partially offset by ARPU declines in mobility and data & IP. Telstra Wholesale revenue fell 3.5 percent to $2.7 billion due to fall in fixed products.

Penn also updated the market on the progress of two of it’s most significant enterprise products announced in the past two years.

The Telstra Programmable Network, announced in May 2017, has amassed 350 customers so far. The platform brings the telco’s networking and cloud products together under a single integrated platform, offering software-defined networking, network functions, virtualisation, cloud infrastructure, data centres and local and international networks from a single portal.

The product is native voice PSTN calling for Office 365 offered in partnership with Microsoft, which now has 2000 customers since it launched in March.

Looking ahead, Penn noted that the next financial year will be a “very material year in the migration to the NBN and its impact on Telstra” as the NBN’s construction is scheduled to finish the following year.

The company expects revenue in the range of $26.5 ­­billion to $28.4 billion and EBITDA between $8.8 billion and $9.5 billion, while restructuring is expected to incur another $600 million in one-off expenses.