Telstra shares feel squeeze

SHARES in Telstra fell sharply yesterday after the telco giant warned tough competition and the NBN were putting a squeeze on earnings that will persist into next year.

In a trading update, Telstra said despite winning customers, the amount each subscriber spends is falling in both fixed broadband and mobiles.

The telco warned it now expects full year 2018 earnings to come in at the bottom end of its $10.1 billion to $10.6 billion range, with “challenging trading conditions” expected to persist into 2018-19.

Updating on its third quarter figures, Telstra said it had added 36,000 subscribers in fixed data and had an NBN market share of 50 per cent.

However, price competition was cutting the value of each subscriber bundle and its own costs for accessing the NBN were affecting underlying earnings, Telstra said.

Similarly, while Telstra gained 60,000 postpaid mobile subscribers, full-year earnings are expected to be lower because of declines in average revenue per user.

At noon yesterday Telstra shares were 11 cents lower at $3.09 and by the close of day had tumbled to $3.04, the low- est level since September 2011.

Telstra yesterday released a speech CEO Andy Penn will give at a telecommunications conference in Boston.

Mr Penn says in the speech that the national broadband network “has driven a number of challenging dynamics for the industry that collectively point to a difficult trading period ahead”.

“This is having a very ma- terial impact on the economics of the whole industry and has triggered a step change in the competitive environment,” he will say. “In the last 12 months alone we have moved from three big players in mobile and fixed to a situation today where we face a fourth network operator entrant in mobile, an increasing number of (mobile resellers) and more than 170 resellers of fixed.”

Mr Penn said to protect market share Telstra has “bestowed” unlimited data on almost half of its fixed broadband base and recently launched an unlimited domestic data plan for mobile.

The company confirmed on Thursday it will offer a total dividend of 22 cents, fully franked, down from 15.5 cents a year earlier.