Telstra profits ride wave of mobile growth
The rivers of gold from Telstra's $11 billion NBN agreement with the government started flowing into the telco's coffers last year and the company received the first $400 million payment for migrating customers from its copper network.
Chief executive David Thodey brushed aside market concerns about whether the company was able to continue its strong growth in the mature mobile sector, saying more people would sign on to multiple devices.
"We still see great growth in the use of multiple devices. People are using their tablets with their smartphones in seamless ways," he said. "I think you are going to see people with four, five or six devices."
The country's largest telco added 1.2 million mobile subscribers in the past year against a backdrop of a softening market. It has more than 15 million customers on its network.
The growth in the number of customers helped Telstra to lift its net profit to $3.9 billion, up from $3.4 billion the previous year.
Mr Thodey said the strong mobile growth was a result of the company's focus on customer services and investment in the network.
"We have been able to deliver the third consecutive year of significant customer growth as a result of our focus on improving customer service as well as continued investment in the network," he said.
Total revenue for the last financial year was $26 billion, up 1.9 per cent compared with the same period last year, largely in line with the management's guidance of growth in the "low single digits".
The company maintained its 28¢ fully franked dividend. It has been doling out the same dividend since the second half of 2006, the main attraction for its 1.4 million retail investors. Shares in Telstra ended 2 per cent higher at $5.13. At this level, shares in the telco are trading at nearly 6 per cent yield.
One another bright spot in Telstra's result is the Network Applications and Services portfolio, which includes managing voice and data services for corporate clients. The division's profit increased 17.7 per cent to about $1.5 billion.
Mr Thodey also indicated his intention to bring the fast-growing network application business to international markets. Performance of Telstra's legacy businesses such as fixed copper line and Yellow Pages directory stagnated, while mobile business units surged ahead.
Deutsche Bank analyst Vikas Gour said the revenue divergence between "good Telstra" (mobiles and network application) and "bad Telstra" (fixed line and Sensis) had become more pronounced in 2013.
Telstra lost more than 300,000 fixed line customers last year and revenues dropped by 2.7 per cent to $7.3 billion, down from $7.5 billion the previous year.
The decline in revenues from the copper network was partly offset by increases in demand for fixed broadband. Mobile revenue was up 6 per cent to $9.2 billion.
Telstra continues to be frustrated by its play in the media after the company revealed a 20 per cent decline in print revenue from its Sensis directory business, which was once a cash cow.
"Sensis' performance was in line with our expectations as the business continues the challenging journey of transitioning to a digital model," Telstra chief financial officer Andy Penn told an analysts briefing.
The company's international assets, especially in Asia, performed strongly and revenues were up 16.2 per cent to $1.7 billion. Incomes from Autohome, China's largest online car sales website, soared 73.8 per cent on the back of strong growth in the world's largest car market.
Frequently Asked Questions about this Article…
Telstra's profit jump was driven largely by fast-paced mobile growth and the first payment from its $11 billion NBN agreement. Mobile customer gains, higher mobile revenue and the initial $400 million NBN migration payment helped lift net profit to $3.9 billion (from $3.4 billion).
Mobile was a standout: Telstra added 1.2 million mobile subscribers in the year, has more than 15 million customers on its network, and mobile revenue rose 6% to $9.2 billion. Management said growth is supported by people using multiple devices like tablets and smartphones.
The $11 billion NBN agreement with the government began contributing to Telstra's coffers last year. Telstra received the first $400 million payment for migrating customers off its copper network, which helped improve earnings for the period.
Telstra maintained its 28 cent fully franked dividend — the same payout it has paid since the second half of 2006. Shares ended the period about 2% higher at $5.13, which at that level implied a dividend yield of nearly 6%.
Telstra's legacy businesses showed weakness: the fixed (copper) line business lost more than 300,000 customers and revenue fell 2.7% to $7.3 billion, while Sensis (the directory/media business) saw a 20% decline in print revenue as it transitions toward a digital model.
The Network Applications and Services portfolio — which manages voice and data services for corporate clients — posted a 17.7% profit increase to about $1.5 billion. Telstra also reported strong international performance, with Asia revenues up 16.2% to $1.7 billion and Autohome income rising 73.8%.
Total revenue for the last financial year was $26 billion, up 1.9% compared with the prior year, which was broadly in line with management's guidance of growth in the 'low single digits.'
Investors should monitor ongoing mobile subscriber growth, further NBN migration payments, the performance and international roll-out of the Network Applications & Services business, trends in fixed-line and Sensis revenues, and continuing strength in Telstra's Asian assets — all factors highlighted in the company's recent results.
Call 1300 880 160
Start a chat
Schedule a call
