Telstra FY18 profit down by AU$345m ahead of nationwide 5G launch

Telstra has announced a net profit of AU$3.5 billion on revenue of AU$26 billion and EBITDA of AU$10.1 billion for FY18, citing the 'enormous impact' of the NBN as well as increased mobile competition.
Written by Corinne Reichert, Contributor

Telstra has reported a net profit of AU$3.5 billion for the 2018 financial year, down by 9 percent from AU$3.9 billion in FY17, citing the "enormous impact" of the National Broadband Network (NBN) as well as a rise in mobile competition ahead of TPG's entrance, with Telstra CEO Andy Penn detailing 5G launch plans to ZDNet.

During FY18, revenue remained stagnant, at AU$26 billion, while earnings before interest, tax, depreciation, and amortisation (EBITDA) were down by 5.2 percent to AU$10.1 billion.

Operating expenses rose by 7.6 percent to AU$18.9 billion, while capex rose by 2.4 percent to AU$4.7 billion in total for the year.

Despite this, Telstra reported customer base growth across both fixed and mobile. The telco made AU$14.7 billion in consumer and small business income, down 0.3 percent; AU$8.2 billion in enterprise, up 1.7 percent; AU$2.7 billion in wholesale, down 3.5 percent; and AU$1.2 billion in operations, up 5.7 percent.

The mobile business brought in AU$10.1 billion in revenue, up 0.4 percent thanks to the addition of 342,000 retail customers during the year for a total base of 17.7 million, with 7.9 million of these in post-paid.

The addition of customers partially offset the drop in average revenue per user (ARPU), from AU$67.70 to AU $65.41 in post-paid, and from AU$22.29 to AU$22.75 in prepaid.

The telco lost 37,000 customers in mobile broadband, while machine-to-machine customers grew by 383,000 thanks to the acquisitions of MTData and VMtech.

Telstra is expecting to be the first in Australia to launch 5G, having earlier this week switched on the new network in parts of the Gold Coast.

"More than 500 new and 1,100 upgraded mobile sites have been switched on, and around 400 small cells activated," Penn and Telstra chair John Mullen wrote in the financial results report.

"We continued to make significant progress in preparing for the commercial launch of 5G, which is central to Telstra's network investment strategy, through a number of major milestones, including switching on 5G technology across selected areas of the Gold Coast, making Australia's largest and fastest mobile network the first in the country to be 5G ready."

During the financial results call, Penn told ZDNet that while 5G handsets will not be ready until next year, having the 5G network live means Telstra will be able to fully test the devices as they do become available.

"What we're really doing is we're starting to roll out 5G to make sure that our network is 5G-ready ... ultimately, we need the handset manufacturers, the big companies around the world, to be making compatible 5G devices -- but our network is essentially ready, so we can start trialling and testing those as they come through," Penn told ZDNet.

"So we're basically rolling out a number of sites, and we'll expect to have 200, and that is across the nation, by the end of the calendar year, and absolutely we are working with Ericsson, they've obviously been a long-term partner with us. I won't comment on whether we're working with other parties as well, as we're obviously in a pretty critically and strategically sensitive time for 5G competitively, but I'm really pleased with some of the things that we're doing in 5G.

"This is going to be an exciting opportunity for Telstra, and an exciting opportunity for telcos, and this is about getting the technology right, being in a leadership position, and that's exactly what we're doing."

Penn added to ZDNet that the 200 5G area launches by the end of calendar 2018 will be in both metro and regional areas.

On taking part in the 5G spectrum auction slated for November, outgoing CFO Warwick Bray said Telstra's current capex forecast does not include spectrum.

Across mobile, Telstra had last month launched its new "simplified" mobile plans, also announcing a AU$5 billion investment in Telstra's networks -- which group executive of Consumer and Small Business Vicki Brady told ZDNet are all about fixing customer service.

During the year, Telstra also launched its Cat M1 Internet of Things (IoT) network, narrowband IoT (NB-IoT) network, and LTE-Broadcast network, as well as announcing its 2Gbps LTE offering.

According to Penn, Telstra is still working on developing a new digital stack for consumer, small business, and enterprise customers.

"We have made significant progress in the development of the new core digital platforms, with enterprise already moving customers to the new environment and consumer and small business to begin its migration in FY19," Penn said.

Must read: Telstra2022: Key takeaways from Telstra's new strategy

Telstra said it is investigating the Triple Zero outage in May, and making efforts to improve the resilience of its network in the face of several outages in the last few months.

"We have conducted a detailed investigation to understand why this happened, are putting in place additional network monitoring and protections, and are leading the development of a collective response management plan for the 000 service with all relevant stakeholders," Penn and Mullen wrote.

Revenue for fixed-line services were meanwhile down 9.2 percent to AU$5.8 billion, with the telco attributing this to "an increased rate of NBN migration and competition". As of June 30, Telstra had 3.6 million fixed data customers, up from 3.5 million last year, and 4.9 million fixed voice customers, down from 5.4 million last year.

Data and IP revenue similarly dropped by 5.2 percent down to AU$2.6 billion, "reflecting customer growth in IP Virtual Private Network (IPVPN), offset by legacy product declines including ISDN and calling products".

Network Applications and Services (NAS) grew by 8.6 percent, however, up to AU$3.6 billion, and global connectivity by 4.4 percent to AU$1.5 billion. Across NAS, managed network services revenue grew by 1.8 percent; unified communications by 1.1 percent; cloud services by 14.4 percent; industry solutions by 11 percent; and integrated service revenue by 39.5 percent. Global connectivity attributed its growth to this NAS growth.

Telstra's media business revenue was down by 1.2 percent to AU$924 million, which it said was mainly due to Foxtel's performance.

"There are now 1,290,000 Telstra TV devices in the market, an increase of 463,000. Sports Live Pass users increased by nearly 1 million to 2,301,000 across AFL, NRL and Netball, with most users receiving the service as part of their mobile subscription," Telstra added.

Penn also revealed that Telstra will be announcing additional media offerings soon.

"There is no doubt that media inclusions are increasingly important to our customers. There is similarly no doubt that the media offerings from Telstra are head and shoulders above those available from our competitors, and our leadership in this area is increasing," Penn said during the results call.

"We have some exciting new media offerings coming to build on Telstra's already superior offerings in sports and entertainment."

By reducing its holdings in Foxtel while simultaneously adding media content to its telco services, Penn added that Telstra is taking advantage of the "disruption the media sector is going through".

Related Coverage

Editorial standards