Telstra profits, revenue slide as NBN costs, bushfires and COVID-19 sting

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Telstra profits, revenue slide as NBN costs, bushfires and COVID-19 sting

Telstra has revealed its profits and revenue have been impacted by a variety of disruptions and ongoing costs in what the telco called a “challenging period”.

In the 12 months ended 30 June 2020, the company reported revenue of $23.7 billion, down 6 percent from $25 billion last year. Profit meanwhile came in at $1.8 billion, down 14.4 percent from $2.1 billion in 2019.

The declines were credited to costs related to the NBN migration, the decline of voice and legacy services, operational issues, as well as impacts of the bushfires and the COVID-19 pandemic.

Chief executive Andrew Penn said NBN wholesale pricing remains the largest negative impact on Telstra’s fixed business.

“Without some sort of long-term change leading to improvement in RSP economics, the risk of retail price increases, reduced customer experience or customers moving onto other networks such as 5G will increase,” Penn said.

“In Telstra’s case the profitability of reselling the nbn is negligible at best – that is not sustainable.”

Penn however acknowledged NBN Co’s move to provide retail service providers (RSPs) with 40 percent more bandwidth (CVC) on the onset of the COVID-19 restrictions earlier this year.

“NBN Co acted swiftly to increase capacity to RSPs during this time at no charge enabling RSPs to support their customers as they moved quickly to work and study from home.”

Overall, the company said the results were in line with guidance and market expectations.

the results showed that through a challenging period Telstra “continued to deliver for customers, support its people and the community, while generating long-term shareholder value.”

“2020 is proving to be an enormously challenging year for everyone – for governments, businesses, communities, and for all of us as individuals. The emotional, mental and economic stresses as a result of the COVID-19 pandemic and necessary restrictions are profound,” Penn said.

“Through this extraordinary disruption – both the COVID-19 and bushfire crises, Telstra was challenged to adapt, to find new ways of supporting our customers, our people and the country in a time of need. I am very proud of the way our team responded, while dealing with the implications on themselves personally.”

Telstra also detailed the progress of its T22 program that was announced in June 2018, now with 12,000 indirect job cuts and 7300 direct workforce role reductions. The telco also brought in some 1600 new roles in software engineering and cyber security, as well as more roles in response to COVID-19 to mitigate workforce offshore capacity issues.

Looking ahead, Telstra forecast FY2021 full income (revenue and finance income combined) to be in the range of $23.2 to $25 billion, while EBITDA is forecast to be between $6.5 to 7 billion. “NBN headwinds” or NBN migration costs, are expected to have a negative impact on underlying EBITDA of approximately $700 million for the period.

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