Telstra's profit is down 5% thanks to a disastrous tech investment now worth $0

Photo: Matt Cardy/ Getty Images.
  • Telstra posted a statutory profit of $1.7 billion for the six months to December, down 4.9%.
  • Revenue was flat but the company added mobile subscribers.
  • The company confirmed guidance and declared a special dividend.

Telstra’s profits have been dragged down by its disastrous investment in Ooyala, the US-based business it thought would become a global platform to stream content to websites and smartphones.

Australia’s biggest telco posted a statutory profit of $1.7 billion, down 4.9%, for the half year to December. It also cut dividends to 11 cents a share from 15.5 cents.

Revenue was flat at $12.9 billion, just 0.8% higher.

Without the Ooyala impairment of $273 million, profit would have been up 10%. This latest impairment effectively writes down Telstra’s investment of about $500 million to zero.

However, Telstra also increased mobile phone subscriber numbers and significantly cut costs.

Here’s a quick look at the numbers:

Source: Telstra

Telstra declared a total interim dividend of 11 cents a share, fully franked, including a special dividend of 3.5 cents, representing a 71% payout ratio on underlying earnings.

Telstra today reconfirmed 2018 full year guidance with income of $27.6 billion to $29.5 billion and EBITDA of $10.1 billion to $10.6 billion.

CEO Andrew Penn says Telstra is operating within a significant period of change, including migration to the NBN, competitive challenges, accelerating pace of technological change and preparation for the transition to 5G.

“We are in one of the most dynamic periods the company has faced and need to increase our level of intensity,” he says.

“We are stepping up how we aggressively compete in the market, particularly leveraging our multi-brand strategy including Telstra, Belong, Boost and Telstra Wholesale.”

He says core fixed costs have been cut by 7.2% for the half.

“While we announced increased targets in August, we will look to do even more, again increasing our focus on reducing costs,” says Penn.

“This is critical against the background of the acceleration in the rollout of the nbn, which is having a material economic impact on Telstra.

“Of the estimated $3 billion annual impact, to date we have cumulatively absorbed approximately $870 million of the negative impact.”

Over the six months, Telstra added 235,000 retail mobile services, including 130,000 postpaid handheld services, to 17.6 million.

Telstra added 454,000 nbn connections, maintaining a 51% market share, excluding satellite. About 57,000 retail bundled customers were added during the half, with one third of these bundles including an entertainment component.

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