Telstra profits drop, NBN deal fails to be released

Large increase in users hit the bottom line

Telstra has reported a half-year result profit drop of 35.6 per cent to $1.194 billion and a 13.9 per cent drop in EBITDA to $4.58b year on year. It expects sales to remain flat for the year ahead.

At an earlier investor day, Telstra had warned investors to expect a fall in profits in the "low double digits" to support deep and fundamental changes to the company. But the fall was steeper than analysts' expectations with expectations of a 12.1 per cent drop in EBITDA predicted by some analysts.

Sales revenue fell by half a per cent to $12.26b while free cash flow fell by 22.9 per cent to $2.02b. Mobile broadband average revnue per user fell while PSTN also declined.

The big drop on profits is partly due to a significant and unexpectedly high increase in users. An extra 919,000 mobile customers signed on to the telco while 139,000 extra broadband customers also came on board - the company now has a total of 2.167 million mobile broadband customers. 214,000 extra T-Hub and T-Box clients also joined Telstra.

Another contributor to the profit drop was a fall in Yellow Pages revenue. Revenue for the once-popular phone guide fell 18 per cent year on year, bringing the Senis unit's revenue down by 7.8 per cent.

Telstra also failed to deliver a draft of its deal with the company rolling out the National Broadband Network, NBN Co. Instead, its CEO, David Thodey, said the two companies had finalised key commercial terms with the company and would still deliver a final deal for shareholder approval by July 1 of this year.

'We have spent a little more this half than originally planned," Telstra CFO, John Stanhope, said. "We've acquired more customers than expected... and built on our user base."

Telstra executives provided negative guidance and said EBITDA would fall by high single digit percentages. It also predicted sales revenue would be "flattish".

Fortunately Stanhope predicted the second half would do better as the customers brought on board started to provide more profits and staff cuts started to make an impact.