Telstra cuts dividend in blow for investors
Townsville TELSTRA will withhold half a billion dollars from its army of mum and dad shareholders after cutting its dividend for the first time in 16 years, as firsthalf profit dropped 4.9 per cent to $ 1.7 billion.
In unveiling the results for the six months to December, chief executive Andy Penn confirmed the telco was cutting its interim dividend payout significantly from the 15.5c it paid a year ago. The ordinary interim dividend has been slashed by more than half, from 15.5c to 7.5c a share, a move originally flagged in August.
But Telstra is also paying an “interim special dividend” of 3.5c a share, taking the total interim payout, to be handed out next month, to 11c.
Mr Penn said the interim dividend would still deliver $ 1.31 billion to shareholders – down $ 530 million from $ 1.84 billion a year ago. He affirmed Telstra expected dividends for the year to June to total 22c.
The telco chief said he thought shareholders “understand and accept” it was the right decision as Telstra freed up cash to invest in new areas for growth.
The telco is fighting a number of headwinds, such as hot competition in the mobile market eroding its pricing power and the loss of about $ 3 billion to the NBN, which is taking over the wholesale market the telco once dominated.
“Telstra is a unique company – it touches everybody in Australia – we are the backbone for the connectivity of the country and are fundamental for the security of the country and for the economy,” Mr Penn said. “Most Australians directly or indirectly have their superannuation invested in ( Tel- stra). I feel that weight of responsibility greatly.”
Retail shareholders rely on Telstra much more than many other companies for its yield. Despite the cuts, by the end of this year Mr Penn will have paid out about $ 13.7 billion to shareholders since he took over in 2015.
Meanwhile job cuts at the telco came in at 569 full- time equivalent positions slashed in the half. Mr Penn yesterday could not rule out greater cuts as it managed costs.
“We are always very sensitive to anything we do that has an impact on jobs and employment. That is absol- utely primary and important,” he said.
“But at the same time we do need to increase the efficiency of the business and the productivity because ultimately that is what will make it successful.”
He said the telco was creating new jobs in areas such as health and cybersecurity and also retraining staff at the same time some jobs were being made redundant, such as in areas affected by the NBN. “As some roles are reducing and disappearing – including as a consequence of the migration to the NBN,” he said.
The biggest whack to yesterday’s result was the $ 273 million cash impairment written off the remaining value it had ascribed to its troubled foray into Silicon Valley, the streaming business Ooyala. Telstra announced the writedown this month.
Over the six months to December, Telstra’s revenue was up 0.8 per cent from the same period a year earlier, to $ 12.91 billion.
It added 235,000 new mobile customers, taking its total mobile customer base to 17.6 million. But the average amount it took in from each customer on a plan dropped 2.9 per cent to $ 65.92. The average revenue it makes on a person on a mobile plan has been sliding since the first half in 2015 when it was as high as $ 69.71.
But Mr Penn did offer a glimmer of hope for shareholders worried about the crunch on mobile revenue, saying there may be a boost when 5G happens.
“When there’s been a new ‘ G’ – as in 3G, 4G and potentially 5G – that has been followed by growth in industry revenues as customers have taken advantage of more capacity and more speed,” he said. “It’s not unreasonable to expect that will be the case with 5G.”