Telstra profits are down 40% but CEO Andy Penn’s salary rose by a third over the same period

Telstra CEO Andy Penn (Getty)

Telstra chief executive Andy Penn was paid $5 million in the 2019 financial year, a 34 per cent increase on the year before when shareholders revolted on executive pay, and has warned the biggest impact on the telco’s earnings from the National Broadband Network roll out is yet to come.

Mr Penn’s overall remuneration, including bonuses and fixed pay, increased 33.6 per cent in 2019 after two years of falls. Last year, Mr Penn was paid a total of $3.74 million, down from $5.2 million in 2017 and $6.76 million in 2016.

Telstra’s net profit after tax fell 39.6 per cent in the 2019 financial year to $2.15 billion, with revenue down 2.3 per cent to $25.26 billion, the telecommunication company’s 2019 financial year results released on Thursday morning show. Earnings (before interest, tax, depreciation and amortisation) fell 21 per cent to $8 billion.

The full-year results are in line with guidance and expectations.

The improvement in pay comes one year into a radical turnaround strategy, revealed by Mr Penn in June 2018 called “Telstra 2022” or T22 after five-year lows in the share price led to a revolt on executive pay and an outcry from shareholders.

This included cutting 8000 employees from its workforce in an effort to offset disruption from the roll out of the National Broadband Network, growing competition in mobile and a new focus on high-speed 5G networks.

A letter from chairman John Mullen and Mr Penn to shareholders posted to the ASX on Thursday morning alongside the results said the telco had taken “great strides toward becoming a company that is easier to interact with” in the year since T22 was launched.

“While we are making good progress on our T22 strategy, we continue to feel the significant impact of the rollout of the NBN on our earnings and profit, and competition in the mobile market remains high,” the letter said, pointing to $600 million of the decline in earnings as due to the impact of the NBN roll out. Excluding the NBN roll out, earnings declined about 4 per cent.

“To date we estimate the NBN has adversely impacted [earnings] by approximately $1.7 billion, and we estimate we are around 50 per cent of the way through the recurring financial impact of the NBN.”

Telstra has forecast the 2020 financial year to have the biggest impact so far from the NBN. Mr Penn has increasingly pushed for the NBN Co to reduce its wholesale pricing to enable retailers to improve their profit margins.

Telstra grew net retail postpaid mobile customers by 378,000, with 181,000 at Belong, and grew fixed-line retail bundle and data services by 107,000.

The telco is guiding total income for the 2020 financial year to be $25.7 billion to $27.7 billion and underlying earnings to be $7.3 billion to $7.8 billion.

Telstra will pay a fully franked 8c final dividend on 26 September. This includes an ordinary final dividend of 5c and a special dividend of 3c.

This article was first published by The Sydney Morning Herald and The Age. Read the original here.