Telstra Cuts Earnings Guidance as NBN Sales Paused

By Robb M. Stewart Features Dow Jones Newswires

MELBOURNE, Australia--Telstra Corp. (TLS.AU), Australia's dominant telecommunications provider, anticipates a hit to near-term earnings as payments from the government's national broadband network are delayed by a halt in sales of the service.

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NBN Co., the company established by Canberra in 2009 to design and roll out a new broadband network across the country and offer wholesale access to retailers, this week said it would delay connections to new areas over its hybrid coaxial-fibre network. One million homes and businesses are ready to connect with the National Broadband Network and NBN still expects to hit a target of 8 million active users by 2020.

In a statement Friday, Telstra revised its guidance for the 2018 financial year to adjust for the six-to-nine month delay in NBN sales but stuck with a recently reduced dividend target for the year.

The company scaled back expectations for total income by 700 million Australian dollars (US$530 million) to between A$27.6 billion and A$29.5 billion for the year through June.

Earnings before interest, tax, depreciation and amortization are likely to be A$600 million less than previously forecast at A$10.1 billion-A$10.6 billion, and free cashflow A$200 million lower at A$4.2 billion-A$4.7 billion, Telstra said.

Ebitda in the last year was A$10.7 billion on income of A$28.2 billion.

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The most significant impact from the delayed sales of the broadband network will be the timing of one-off receipts that Telstra collects from NBN, although the company said that would be partially offset by lower NBN connection costs and network payments to NBN and longer-term the delays will be modestly financially positive over the full rollout of the network.

In mid-June, Telstra moved to cut up to 1,400 jobs by the end of 2017 as it grapples with intensifying competition, new technologies and an up to A$3 billion earnings shortfall as the National Broadband Network switches on around the country.

More than a year ago, Telstra launched a A$3 billion investment to upgrade its networks over three years as part of efforts to attract and retain customers. As the NBN network rolls out, Telstra is gradually being stripped of its wholesale infrastructure monopoly. It agreed to sell its fixed-line infrastructure to the Australian government for A$11 billion to help build the NBN.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 30, 2017 16:59 ET (21:59 GMT)