Telstra holds line to dial in dividend

TELSTRA’S income has dropped by more than 10 per cent for the first half but the telco will maintain its 8c dividend as COVID-19 and NBN hit the telco’s bottom line.

Releasing its first-half results on Thursday, Telstra said it would pay an interim dividend of 5c a share and a 3c special dividend. Combined with an expected 8c dividend at the full year, the total dividend for the 2021 financial year will be 16c a share.

The market liked the news, sending Telstra shares 2.5 per cent higher to $3.25.

Telstra chief Andy Penn also announced that Telstra intended to transition to full ownership for all its branded retail stores across Australia. The telco currently owns and operates 60 stores, with a further 166 run by individual licensees, and 104 operated by Vita Group. Vita shares plunged 27.6 per cent to 81.5c on Thursday.

Telstra posted revenue for the first half of $10.98bn, down 9.7 per cent, while total income was down 10.4 per cent at $12bn. Profit was down 2.2 per cent at $1.13bn. Mobile revenue fell due to lower hardware sales.

Reported earnings before interest, taxation, depreciation and amortisation (EBITDA) slumped 14.7 per cent to $4.1bn, while underlying EBITDA fell 14.2 per cent to $3.3bn.

Mr Penn said an NBN headwind of $370m and an estimated $170m hit from COVID-19 were to blame for the downturn, and that underlying EBITDA would have otherwise been broadly flat. “After a decade of disruption following the creation of the NBN, and with its rollout now declared complete, we can clearly see the path to underlying growth,” he said.

“We responded strongly to the financial headwinds created by the NBN through our T22 strategy. This strategy is transforming Telstra while balancing the needs of our customers, our employees and shareholders. We are now less than 18 months from completing T22.” The company said it added more than 80,000 postpaid handheld mobile services for the half, and 46,000 new prepaid handheld users. Postpaid handheld average revenue per user declined 8.6 per cent for the half.

Telstra said its proposed spin-off of InfraCo Towers was on track to be completed by the end of the financial year. Mr Penn indicated that, early next financial year, the company would search for external investors for its tower division: “We are undertaking significant verification and due diligence on our towers and property, appointed key members of the management team and advisers, and preparation work is well advanced.”

Analysts said the challenging results had been largely as expected.

IBISWorld senior industry analyst Liam Harrison said Telstra had some breathing room in the highly competitive telco market, given the merged TPG-Vodafone had yet to take full advantage of expected synergies.