Telstra price rise delivers bumper profit

Telco giant Telstra has reaped the benefits of rising prices, posting a bumper profit and strong growth in its mobile business with chief executive Vicki Brady not ruling out a further price hike this year.

The Sydney-based company on Thursday posted a $1 billion net profit for the six months to December 31, up 11.5 per cent year-on-year, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were up 3.1 per cent to $4 billion. Total revenue edged up 1.2 per cent to $11.7 billion.

The company cut its profit forecast however after its usually lucrative enterprise unit fell flat.

Announcing a “detailed review” of the underperforming enterprise business, the telco said it now expects between $8.2 billion and $8.3 billion in underlying earnings for the 2024 financial year, down from its guidance of as much as $8.4 billion previously.

Brady lauded the telco’s mobile performance, which she said was driven by more customers, higher revenues per customer and cost discipline.

“We know the external environment is putting pressure on consumers and businesses, and we will continue to invest to deliver connectivity that is reliable, resilient and secure, and offer plans that are simple and deliver the services and choices our customers need,” Brady said on Thursday.

The company attracted some criticism last May when it raised the prices of its postpaid mobile plans by 7 per cent, in line with inflation but above analyst expectations, while lifting prepaid prices by 20 per cent.

The changes didn’t put a dent in its customer numbers, however, with Telstra growing its mobile revenue by 13 per cent for the half.

Telstra reviews its plan pricing annually and Brady did not rule out another rise this year.

“It’s obviously not appropriate for me to talk bout future pricing decisions on mobile,” she said. “We’re very pleased with the business, and I am really pleased to see more customers choosing Telstra.”

The company’s network applications and services [NAS] business disappointed, seeing its sales fall across its calling applications and professional services.

Revenues at the division, which includes network security, cloud services, unified communications and industry services, were hit by competition and technology change, and Brady said the unit “is clearly a long way from where we need it to be”.

“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,” said Brady.

Jarden analyst Tom Beadle said that the results were strong overall particularly for Telstra’s mobile unit.

“While the lowering of the range may disappoint, we highlight that the weakness in NAS and 1H (first half) miss means the market could be underestimating the momentum in Telstra’s key mobile and InfraCo fixed businesses… And highlight the decision to lift the dividend appears to show confidence that momentum in these businesses can continue”.

Telstra CFO Michael Ackland with CEO Vicky Brady deliver the Telstra results, at the Telstra Auditorium in the Sydney CDB, Thursday 15th of February 2024. Photo: Dion Georgopoulos / Australian Financial Review

Brady added that Telstra gained tens of thousands of new customers as a result of November’s Optus outage, which impacted some 10 million Optus customers and felled rail networks, small businesses and hospital communications.

Telstra added 63,000 net new postpaid customers across the six-month period.

“In terms of the Optus outage, I would characterise its impact as similar to prior events,” Brady said referencing the Optus data breach in late 2022.

“We would estimate that impact to be maybe in the tens of thousands [of customers]. To be honest, we had a very good December quarter… And in terms of the competitive dynamic, it’s brought front of mind for customers that it’s all about resilience and reliability, whether in our personal lives or in our businesses.”

Telstra will pay a fully franked dividend of 9 cents per share, up 5.9 per cent year-on-year, to be paid March 28.

Telstra shares dropped slightly, last trading at $3.93, giving the company a market valuation of about $45.4 billion.

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