Telstra reports 36% increase in net profit in FY16; announces AUD3bn network upgrade plan

11 Aug 2016

Australian fixed line incumbent Telstra has published its annual financial results for the period ended 30 June 2016, revealing that net profit after tax had surged by almost 36% year-on-year, boosted by the sale of shares in Chinese online car sales business Autohome.

In the year under review Telstra recorded a total income (excluding finance income) of AUD27.050 billion (USD20 billion), up from AUD26.112 billion, with total revenue standing at AUD25.911 billion, a 3.6% y-o-y increase. In terms of segment performance, income from the Telstra Retail unit declined by 1.5% to AUD16.656 billion, while revenues from the consumer sector falling by 1.2% y-o-y to around AUD11.9 billion; business revenues were 2.4% at approximately AUD4.8 billion. Telstra’s Global Enterprise and Services (GES) division saw income increase 11.5% y-o-y to AUD6.262 billion, with Telstra Wholesale seeing revenues of AUD2.622 billion, representing annualised growth of 1.4%. In terms of key product revenue, mobile accounted for the largest proportion of the company’s income, totalling AUD10.441 billion in FY16, down from AUD10.654 billion a year earlier, with turnover from’ fixed’ services declining by 2.2% to AUD7.029 billion. By comparison, ‘data and IP’ revenues reached AUD3.789 billion, representing a 10.9% increase against FY15, while turnover attributable to ‘network applications and services’ and ‘media’ stood at AUD2.763 billion (up 14.3%) and AUD974 million (up 4.6%), respectively.

EBITDA in the twelve months ended 30 June 2016 reached AUD10.465 billion, representing a marginal decline (0.6%) from the AUD10.533 billion recorded a year earlier, with the company reporting EBIT of AUD6.310 billion, down from AUD6.559 billion. Profit attributable to equity holders of Telstra totalled AUD5.780 billion, up from the AUD4.231 billion reported for the year-ago period. Capital expenditures stood at AUD4.045 billion in FY16, up from AUD3.589 billion a year earlier, with much of the increased investment going on its mobile segment, particularly with a view to extending and improving its 4G network. Further spending is planned, with Telstra announcing it will invest up to an extra AUD3 billion over three years on ‘a major wave of customer-focused investments in its networks of the future and digitisation’. Telstra’s CEO Andrew Penn was cited as saying that his company’s CAPEX to sales ratio in each of the next three fiscal years would increase to approximately 18%, its highest level since 2008/09, when the operator was building out its 3G infrastructure.

Details of the investment program will be progressively confirmed during FY17 to FY19 ‘to maintain strategic advantage in a heavily competitive environment’, though Telstra has noted its plans include: further boosting capacity in key networks to cater for increasing demand for core services; undertaking an ongoing evolution of 4G network capabilities to lay the foundations for 5G; and strategic investments in fixed network services, taking into account the ongoing National Broadband Network (NBN) rollout, particularly in ADSL service areas.

Australia, Telstra (incl. Belong)