Telstra splashed $1.3 billion on upgrading its network

Telstra has splashed $1.3 billion to upgrade its core network since announcing its $3 billion investment program 18 months ago.

Chief executive Andy Penn took the opportunity to update shareholders on the progress of Telstra's investment program revealed in August 2016, which set aside $1.5 billion for network upgrades, another $1 billion to digitise the company's business processes and $500 million to improve customer service.

“We have upgraded our core backbone infrastructure in Australia to enable support of a five-times increase in capacity to meet future customer demand and improved resilience," Penn said.

"Our next-generation optical transport network has already been deployed on routes between five capital cities."

Penn also revealed that Telstra had spent $100 million on the digitisation program so far, saying it was still in its early stages but had already delivered some early wins like improving Telstra's digital self-service channels.

New network initiatives include the launch of the CAT M1 IoT network that was switched on in September, covering three million square kilometres. Telstra followed that up with the launch of narrowband IoT capability on the network in January.

Telstra has also continued to invest in the upcoming launch of 5G services, which has been slated to go live in early 2019.

“We are now breaking through achieving 1Gbps theoretical speeds on 4G and gearing up for new speed milestones as we prepare for the rollout of 5G," Penn said.

"We are well advanced in our planning for 5G and last week announced a suite of activities over the next six months on the Gold Coast, as we opened our 5G Innovation Centre. These investments continue to support industry-leading mobile differentiation, coverage, speed and resiliency.”

Telstra's IT services business also had a strong showing, with revenue growing 14.1 percent to $1.6 billion in the half-year ending 31 December. However, Penn warned that earnings from the Networks Applications and Services business was down two percent due to the timing of major contract milestones.

Telstra continues to look for ways to plug the $3 billion earnings gap that will be left when the NBN rollout is completed. Penn said that Telstra has so far absorbed $870 million of the negative impact, including $370 million in the last six months.

“The impact of the NBN, along with increased competition, highlights the importance of the up to $3 billion strategic investment program, and we are on track to deliver economic benefits from this of more than $500 million of EBITDA by FY21," Penn said.

“We will accelerate these investments to lay the foundation for future success, scrutinising every aspect of our capital spending to ensure our investments are driving the greatest results.”

Telstra's total revenue was up 5.9 percent to $14.5 billion. However, earnings were down 2.5 percent to $5.1 billion and net profit was down 5.8 percent to $1.7 billion. Penn attributed the lagging earnings on the $273 million non-cash impairment earmarked earlier this month when Telstra wrote down the value from its advertising technology business Ooyala.

Telstra added 235,000 retail mobile services, including 21,000 services from its recently launched Belong Mobile budget telco.

The telco also added 454,000 NBN connections in the half-year, maintaining its position as the largest NBN retailer provider with 51 percent market share.