Telstra to review enterprise unit after revenue plunge

Telstra has begun a review of its enterprise business after a sharp drop-off in key services late last year.

The telco says professional services sales sank 12.4% and revenue from calling apps plunged 17.6% in the second half of 2023, with EBITDA at the network and services (NAS) unit sliding 6.9 percentage points.

Handing down its interim result Thursday, the company said it had trimmed its full-year EBITDA guidance to 8.2 billion to 8.3 billion Australian dollars (US$5.33 billion to $5.39 billion), down from A$8.4 billion previously ($5.46 billion).

"We are undertaking a full review of the products and services we provide within our enterprise business, and particularly our NAS portfolio, to make sure they both meet the current and future needs of our customers, and create shareholder value," CEO Vicki Brady said.

She said the falloff in the two corporate segments was clear by November and had accelerated in the final weeks of 2023.

"Frankly, what we saw in the last part of last calendar year was a very significant drop-off, so the decline did accelerate very, very quickly," she told an earnings call Thursday. "It was surprising, in fact, to see how quickly our sales pipeline dropped and some of those opportunities moved out."

Long-term future

She said she was confident the NAS services had a long-term future, "but there is definitely some cyclical impact at the moment, particularly related to business confidence and the macro environment."

Revenue at the fixed-line enterprise division contracted by 2.3%, mostly due to anticipated declines from the data and connectivity solutions segment.

The big Australian telco reported net income of A$1 billion ($650.6 million) in the six months to the end of December, up 11.5%, with topline revenue improving 1.2% to A$11.7 billion ($7.6 billion) and underlying EBITDA 3.1% higher at A$4 billion ($2.6 billion).

Gains in mobile

The mobile business performed strongly, with an assist from a catastrophic national outage at rival Optus, which drove "tens of thousands" of customers onto Telstra, Brady said.

Telstra added 340,000 mobile subs in the half, helping to propel total mobile revenue 3.8% higher and to grow service revenue by 6%.

Telstra won't reveal its number of 5G customers, but the company says 5G now accounts for 48% of traffic and that the network reaches 87% of the population.

"Our mobiles business remains central to growth and continues to perform strongly, growing EBITDA almost A$300 million in the half driven by more customers, ARPU growth and cost discipline," said Brady.

Among other divisions, the international unit grew 15%, InfraCo Fixed by 8.2% and tower JV Amplitel by 16.2%.

Telstra's share price closed 2.26% lower in Thursday trading.