Telstra lifts H1 profit to $1.7bn

Updated: Telco on track to deliver low single digit earnings growth in FY, interim dividend beats expectations, shares lift 1.5%.

Telstra Corporation (TLS) has confirmed it is on track to deliver low single digit earnings growth in the full year, after posting a slight increase in first-half profit.

Investors responded well to the news. At the 1015 AEDT official market open, Telstra shares were 1.57% higher at $5.19, against a benchmark index lift of 0.07%.

In subsequent trading Telstra shares hit as high as $5.22.

In the six months to December 31, Telstra posted a net profit of $1.704 billion, a 9.2% increase on the $1.56 billion recorded in the first half of the previous year.

A survey of six analysts had the median forecast for net profit in the period at $1.8 billion, Bloomberg said.

In the same period, revenue from ordinary activities was $12.984 billion, a 3% increase on the $12.711 billion in the previous corresponding period.

Telstra said it expects free cash flow of between $4.6 billion and $5.1 billion in the full-year, and accrued capital expenditure to be around 15% of sales.

The telco will pay a fully-franked interim dividend of 14.5 cents on March 28 to shareholders on the register at February 28.

A survey of seven analysts estimated the interim dividend would be 14 cents, Bloomberg said.

Customer focus pays dividends: Thodey

Chief executive officer David Thodey said Telstra's customer focus had resulted in continued mobile growth with the addition of 739,000 new retail mobile customer services and an increase in mobile services revenue of 7.3%.

"We continued to invest in maintaining our network leadership, highlighted by our $650 million capital investment in mobiles infrastructure in the half," he said.

Mr Thodey noted the refreshed strategy Telstra announced during the half, including the realignment of the group's structure to provide increased focus and resources to growth areas such as Asia and Network Application and Services (NAS).

“Our NAS business recorded revenue growth of 29 per cent to $821 million," he said.

"We continued to invest in NAS by building our capabilities and acquiring companies such as North Shore Communications (NSC) and O2 Networks."

NBN talks ongoing

Mr Thodey confirmed that Telstra was in talks with NBN Co, with regards to re-negotiating the access agreements to the telco’s copper infrastructure.

Telstra secured an $11 billion deal with the previous government to rent its network of pits and ducts to NBN Co. However, the Coalition’s planned multi-technology NBN rollout will require NBN Co to buy or lease Telstra’s copper network, once valued at $17 billion.

Mt Thodey said that he was focused on maintaining the value of the current agreements.

“We are committed to acting in the best interests of our shareholders and are focused on maintaining the value of current agreements, achieving certainty of outcome as ssoon as reasonably possible and minimising any additional regulatory risk,” Mr Thodey said.

He added that the remediation work carried out to Telstra’s pits after the asbestos scare has had no material impact on the telco’s operating results.

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