Telstra net falls 13% on restructuring costs

Restructuring costs and continued weakness in its enterprise business drove Telstra's full-year earnings down by 12.8%, the company reported Thursday.

The telco announced full-year net profit of 1.8 billion Australian dollars (US$1.2 billion), with revenue up 1% to AU$23.5 billion ($15.5 billion).

The bottom-line was weighed down by AU$715 million ($472.4 million) in one-off costs, including $311 million for its fixed-line enterprise business, which reported a two-thirds decline in EBITDA.

But executives on an earnings call Thursday pointed to strong underlying numbers, including a 7.5% rise in earnings and 3.7% higher EBITDA, as well as robust growth in the mobile and infrastructure units.

Telstra's share price closed 2.0% higher.

CEO Vicki Brady said the fixed enterprise business "is clearly a long way from where we need it to be."

The unit reported 5% lower revenue of AU$3.5 billion ($2.3 billion), with EBITDA of AU$136 million ($90 million), down from AU$411 million ($272 million) a year ago.

A big part of its decline has been the migration from high-margin voice services to cloud calling and conferencing. But in the past year corporate digital transformation spend has also fallen, reducing demand for professional services.

'Need to modernize'

Brady said the company would slash its enterprise portfolio by two-thirds and either replace the legacy products with more modern versions or work with a partner.

"We do need to modernize our product set," she said. "That work is ongoing in terms of making sure we do fundamentally reset that business. There's been a huge amount of technology disruption."

The mobile business boosted revenue by 5% to AU$10.7 billion ($7.1 billion), with ARPU up 2.7%. It added 560,000 new subs, most of them in its wholesale segment.

The fixed infrastructure unit increased revenue by 7.4% and EBITDA by 5.8%, while EBITDA grew 16% at mobile infrastructure JV Amplitel and 9% in the international division.

Brady said Telstra's T25 cost-cutting and restructure strategy was on track, with AU$122 million ($80.6 million) in cost reductions in the past two years. The company will announce plans later this year for its next three-year program.

For 2024-25 the company has forecast underlying EBITDA of AU$8.5 billion ($5.6 billion) to AU$8.7 billion ($5.7 billion), up from AU$8.2 billion ($5.4 billion) this year, with capex steady at AU$3.2 billion ($2.1 billion) to AU$3.4 billion ($2.2 billion).

Brady also confirmed Telstra had agreed to delay the closure of its 3G network until October 28, two months past the original deadline.

"We've listened to feedback, and we've worked in a very constructive way with government as we work through this process," she said.

Telstra and Optus will jointly fund a public education campaign in the weeks before the shutdown.