Telstra Profit Down 5.8%, Dividend Slashed, Ooyala To Blame

Telstra's profit is down 5% thanks to the disastrous tech investment now worth $0

The move steered the telco away from its historical practice of paying nearly all profits in dividends, to paying 70 to 90 per cent - a ratio it says is "more in line with global peers and local large companies".

Telstra's profits have been dragged down by its disastrous investment in Ooyala, the US-based business it thought would become a global platform to stream content to websites and smartphones.

Network Application Services - which includes cloud applications and consulting services - continued to be Telstra's growth driver, with revenue up 14 per cent to $1.7 billion.

The Board has resolved to pay a total fully franked interim dividend of 11 cents per share, comprising an interim ordinary dividend of 7.5 cents per share and an interim special dividend of 3.5 cents per share, consistent with Telstra's revised dividend policy and FY18 guidance. This latest impairment effectively writes down Telstra's investment of about $500 million to zero.

Other metrics were tracking within company forecasts, including earnings before interest, tax, depreciation and amortisation, which was A$5.2 billion compared with full-year guidance for between A$10.1 billion and A$10.6 billion.

However, Telstra also increased mobile phone subscriber numbers and significantly cut costs.

Penn continues, "We have upgraded our core backbone infrastructure in Australia to enable the support of an up to five times increase in capacity to meet future customer demand and we've improved our resilience".

The company's overall net profit for the half was A$1.7 billion ($1.35 billion), its lowest interim profit in five years and coming in below an average A$1.9 billion forecast by three analysts polled by Reuters.

"The impact of the NBN, along with increased competition, highlights the importance of the up to $3 billion strategic investment program, and we are on track to deliver economic benefits from this of more than $500 million of EBITDA by FY21", Penn said. For example, we're stepping up how we aggressively compete in the mobile market by leveraging our multi-brand strategy including Telstra Belong, Boost and Wholesale.

"We haven't signalled what we expect will be in the second half but what I would say is we are at the peak period of the NBN rollout", Mr Bray told AAP. Penn said that Telstra has so far absorbed $870 million of the negative impact, including $370 million in the last six months.

For the period, the telco added 235,000 retail mobile services - 130,000 postpaid handheld services, to 17.6 million.

Telstra said it added 454,000 NBN connections, maintaining a 51 percent market share, excluding satellite. About 57,000 retail bundled customers were added during the half, with one third of these bundles including an entertainment component.



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