By David Swan
Telstra chief executive Vicki Brady is confident customers will stomach higher prices amid a cost of living crunch, as the telco revealed a profit slide of more than 10 per cent on Thursday.
The company in its annual results posted a net profit of $1.79 billion, down 13 per cent year-on-year, while revenue edged up by one per cent to $22.9 billion. The company booked a $311 million write-down on its enterprise business, which services large companies and government departments.
Telstra chief executive Vicki Brady said data usage had grown significantly on its network.
Higher operating costs and poor performance of the telco’s giant’s enterprise unit weighed on its results, but Telstra’s mobile business is continuing to grow at a rapid clip. Mobile earnings climbed nine per cent to $5 billion and Telstra added more than 560,000 new mobile customers over the past financial year.
While the telco’s mobile business is booming, customers’ appetite for higher prices is about to be tested, with postpaid prices rising in August and prepaid prices in October.
“We see huge demand for our mobile services,” Brady said. “We have made announcements and communicated to our customers pricing changes that are upcoming, and look, we need to balance that.
“We see consumers and businesses relying more and more on devices, and we’re also aware of the pressures consumers are facing at the moment from a cost of living point of view.”
Customers could opt for Telstra’s budget brand Belong if they preferred a more value-based offering, she said.
“In what we provide to our customers there is absolute choice. And we make these choices in a very careful and considered way given the demand, and the amount of investment we need to make in our network.”
While Telstra’s mobile business is booming, its enterprise unit continues to struggle. Brady in May announced plans to cut up to 2800 jobs at Telstra, with the enterprise unit the hardest hit. It was a move she said at the time would help the telco stay competitive and make the investments needed to support the growth in data volumes across its business, saving the company $350 million.
Telstra has booked $247 million in redundancy costs related to those lay-offs.
“While most parts of our business performed strongly, Fixed Enterprise is clearly a long way from where we need it to be,” she said on Thursday.
“We commenced action during the year to address challenges in our Enterprise business, and took additional action on cost overall.”
The company will pay a final dividend of 9¢ a share, bringing its total dividend for the year to 18¢ a share.
It lifted its forecast for underlying earnings to $8.5 billion to $8.7 billion, from previous guidance of $8.4 billion to $8.7 billion. Telstra shares nudged higher on Thursday, climbing by 2.5 per cent to $3.96.
Wilson Asset Management senior equity analyst Anna Milne said it was a strong result from Telstra.
“Mobile was strong, and will grow next year with the announced price increases,” Milne said. “Enterprise was in line with lowered expectations, and it’s positive to see this isn’t deteriorating further.”
eToro market analyst Josh Gilbert called the numbers a mixed bag, however.
“Its fixed enterprise business continued to be a drag, following the weakness we saw in the first half of the year,” he said.
“A positive in these very murky waters was another increase in its dividend despite falling profits and a slight narrowing of its FY25 guidance. That said, shares are flat over a five-year period, so its only its dividend that is a saving grace for investors, with the lack of growth over that period clearly disappointing.
Telstra will cut almost 3,000 roles from its workforce in an organisational change that will see it ‘reset’ its enterprise business.
“Ultimately, this is a disappointing result for Telstra shareholders at a time when they can’t seem to catch a break… there is no doubt that the business has plenty of work to do in the short term.”
Telstra on Wednesday announced a delay in the shutdown of its 3G network, and said it would conduct a public safety campaign following fears relating to public safety and triple zero emergency services. Some older handsets will be unable to make triple zero calls once the 3G network is shut down on October 28.
Telstra owns 35 per cent of Foxtel, which is now on the market after News Corporation announced last week it was open to selling the pay TV operator. News owns a 65 per cent majority stake in Foxtel.
Brady said her telco would be supportive of “the right offer”.
“There’s no decisions made at this stage,” Brady said.
“What’s been really pleasing to see is how Patrick [Delany, Foxtel CEO] and the team have really transformed that business over the last few years… It’s such a stark difference to where it was many years ago,” she said.
“From our point of view, if it got to the stage where there was an offer for Foxtel at the right level of value, then yes, we would be supportive of that with News Corp.”
Licensed by Copyright Agency. You must not copy this work without permission.
