Telstra shares fall on profit warning

Telstra shares slumped 5 per cent to $3.04, the lowest level since 2012, after it warned that its earnings will be at the bottom of its $10.1-$10.6 billion range because of price competition and the negative impact of the national broadband network rollout on its earnings.

Only three years, ago Telstra was trading above $6. 

In his speech to the TMT conference, Telstra CEO Andy Penn  said: “We now expect FY18 EBITDA to be at the bottom end of FY18 guidance1 and the challenging trading conditions in FY18 to continue in FY19, including pressure on mobile and fixed ARPUs (average revenue per user) and the accelerating impact of the nbn.” 

Telstra’s income is now expected to be around the middle of its $27.6 – $29.5 billion range. 

Mr Penn reassured investors Telstra’s dividend would be 22 cents fully franked.

And revenue is expected to be around the middle of the $27.6 – $29.5 billion range and free cash flow near the top, perhaps even above, its $4.2 – $4.7 billion guidance. 

Mr Penn said Telstra will continue to focus on reducing costs and expects costs to reduce by approximately 7 per cent.

He said that while he is optimistic about the long term of the industry and for Telstra, the big concern is about the short term. 

“The National Broadband Network in particular has driven a number of challenging dynamics for the industry that collectively point to a difficult trading period ahead,” Mr Penn said. 

“This is having a very material impact on the economics of the whole industry and has triggered a step change in the competitive environment.”

An award winning author and journalist, commentator, lecturer, and speaker, Leon is a freelance business journalist who covers a range of areas including politics, strategy, globalization, leadership and all the big trends ahead. His main skill is summing up all the news that’s around. For the last 30 years, his main focus has been on management issues. He also produces two podcasts for RMIT University, Talking Business and Talking Technology. Leon has worked for Fairfax, News Limited, AAP and the Herald and Weekly Times.

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