Telstra’s profit downgrade last Monday, which saw the shares lose 10.9% over the week and touch seven-year lows, probably wasn’t a shock for many people. Telstra said that the lowering of earnings (EBITDA) guidance for FY18 from a “range of $10.1 billion to $10.6 billion” to “the bottom end of the range” was caused by two main factors.
Firstly, an intensely competitive mobiles market, where revenue is under pressure. The key ARPU measure (average revenue per user) for post-paid customers declined from an average of $65.92 in the first half to $65.35 in the third quarter, and is down by 3.6% on the corresponding quarter in FY17. Secondly, not only is the NBN impacting fixed line customers (which is expected), the ARPU Telstra is receiving on its NBN connections is under pressure.
The speed of the decline is also worrying some analysts, with one analyst suggesting that the fall in core earnings, which excludes net ‘one-off’ NBN receipts, is closer to $1.0 billion.