Telstra Corporation (TLS) SNAPSHOT
Profile: Telstra (TLS) is a telecommunications and technology company, providing services including fixed broadband, mobile and data to personal, small businesses and enterprise customers domestically and internationally.
History: TLS began operating under its current entity when Telecom (the Australian Telecommunications Commission) merged with the Overseas Telecommunications Corporation in the 1990s. The Australian government floated a third of its ownership in TLS when it was listed on the ASX for the first time in 1997. A further sixth was sold to the public in 1999, and in 2006 the government sold down a further third, with the remainder placed in Australia’s Future Fund. In 2011, the Future Fund sold down its stake to be in line with TLS’s index weight.
Earnings composition: The Mobile division generated $3.6bn (46%) of TLS’s FY19 underlying EBITDA (earnings before interest, tax, depreciation and amortisation). Fixed generated $1.4bn (18%) of EBITDA, and earnings from Data & IP was $1.5bn (19%). Earnings from recurring NBN DAs (National Broadband Network Definitive Agreements) and Network Applications and Services were $731m (10%) and $331m (4%) respectively. NBN DAs are payments from the NBN to Telstra for the use of its infrastructure, such as ducts, pits and exchange rack space.
Most recent result – 1H20: Underlying EBITDA declined 6.6% on the prior corresponding period (pcp) to $3.9bn. TLS continues to be negatively impacted by the ongoing rollout of the NBN – incurring connection costs and reduced Fixed earnings. TLS estimates the “in-year NBN headwind” – the estimated recurring impact of the NBN on EBITDA in 1H20 – was c.$360m. Excluding the headwind, TLS estimates underlying EBITDA grew by c.$90m, with growth in Network Applications and Services (NAS), recurring NBN and Global Connectivity – the first time EBITDA has grown since FY16. Mobile EBITDA declined 2.8% on the pcp to $1.9bn, with lower services revenue. TLS’s revenue, reported as ‘total income’, was $13.4bn, down 2.8% on the pcp. Reported NPAT was $1.2bn, down 4.6% on the pcp (with the prior period result adjusted for changes in reporting basis). A dividend of 5c and a special dividend of 3c were declared, in line with the pcp.
Company outlook: TLS forecasts FY20 income of $25.3-27.3bn and underlying EBITDA of $7.4-7.9bn (with a recent update guiding to lower end of range).
Important dates: FY20 results are scheduled for 13 August 2020. Full year ex-dividend date is 26 August 2020. Payment date is 24 September 2020.
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