Telstra profit up 11pct, to review enterprise business

Derek Rose |

Telstra’s H1 net profit rose to $1 billion on the back of a strong performance in its core business.
Telstra’s H1 net profit rose to $1 billion on the back of a strong performance in its core business.

Telstra has begun a review of its networking solutions division for enterprises, which has seen a dramatic drop in its sales pipeline as businesses cut spending on infrastructure.

Telstra CEO Vicki Brady said on Thursday the company’s Network Applications and Services (NAS) division is “clearly a long way from where we need it to be” and the company would be looking to cut costs including possible layoffs.

Ms Brady said that Telstra’s overall momentum was good, with continued growth across its core mobile business as well as its fixed consumer and small business and infrastructure divisions.

The company posted a $1 billion first-half net profit, up 11.5 per cent from the same time a year ago, with revenue up 1.1 per cent to $11.4 billion, while underlying earnings before interest, tax, depreciation, amortisation and depreciation (EBITDA) rose 3.8 per cent to $4 billion.

The lacklustre first-half results from its NAS division did lead the telecom to flag that it would deliver a full-year EBITDA that’s at the lower half of its previous guidance of $8.2 billion to $8.4 billion. 

Telstra CEO Vicki Brady.
Telstra CEO Vicki Brady says the company will look to cut costs including possible layoffs. (HANDOUT/TELSTRA)

Ms Brady said that Telstra had cautioned in November that it was seeing weakness in its professional and managed services business and the company had adjusted its outlook at that time.

“Then, frankly, what we saw in the last part of last calendar year was a very significant drop-off,” she told reporters.

“The decline did accelerate very, very quickly. It was surprising to see how quickly our sales pipeline dropped, and some of those opportunities moved out.”

Ms Brady said the enterprise division’s data and connectivity division was performing as expected and she remained convinced its enterprise networking remained a good business in the medium to long term.

“But there is definitely some cyclical impact at the moment, particularly related to business confidence in the macro environment.”  

The company’s core mobile business remains strong, growing EBITDA almost $300 million in the half and adding more than 340,000 new customers by years-end.

It was difficult to know how many of those were acquired because of the Optus outage in November but Ms Brady estimated it was in the low tens of thousands.

She touted the reliability and resilience of Telstra’s network, and said its 5G service now covers 87 per cent of Australia’s population. 

This week Telstra’s first call was placed using a OneWeb satellite in low Earth orbit, which will further expand coverage to remote areas.

Telstra already has an enterprise product using Elon Musk’s Starlink service and plans to launch a consumer product in March.

Ms Brady said that Telstra was also deeply involved in artificial intelligence, using it from everything to help keep customers safe from scams to answering customer queries.

“Everyone wants to talk about generative AI, obviously the latest and greatest, and we’re also rolling that out and using it across our business,” Ms Brady said, including through a new Ask Telstra service that used technology from Microsoft and OpenAI.

Telstra also plans to switch off its 3G service by June 30, with Ms Brady saying the company has an “absolute commitment” that its 4G coverage will be equivalent to existing 3G coverage by then. More than 98 per cent of sites already have 4G installed, she said.