In a separate but linked statement delivered to its investor day on Thursday, Telstra reaffirmed its profit forecasts for the financial year 2021, a move that suggests the company has survived the COVID-19 pandemics and lockdowns without a major hit.
Telstra said it still expects underlying earnings expected of between $6.5 billion and $7 billion for the year to June 30, 2021.
And it is confident it can lift earnings to a range of $7.5 billion to $8.5 billion by the end of the 2022-23 years (ie two years later).
Hitting that 2023 earnings target is critical to Telstra maintaining its dividend of 16 cents a share.
The company has promised an update on the size of the dividend at its interim results in February.
”If we are successful in getting into the bottom end of the $7.5 billion to $8.5 billion underlying EBITDA [earnings before interest, tax, depreciation and amortisation] range by FY23, this would equate to an estimated ROIC [return on invested capital] of close to 8 percent,” Mr Penn said.
“As a result, we have updated our ROIC target accordingly to be around 8 percent” by fiscal 2023, he said.
Mr. Penn said Telstra was very well progressed on delivering its T22 strategy – becoming a much leaner, simpler and digital company for its customers – and this had prepared it well to respond to the challenges of COVID and return to underlying growth.
“Our mobile business continues to perform strongly relative to our competition. Our clear lead in 5G means we have the opportunity to capitalise on a new multi-year cycle of growth and our transacting minimum monthly commitment has continued to grow in FY21.
“We already have more than 400K 5G devices on our network and we expect that to reach around 750K by the end of the calendar year.
“The impact of the NBN on our fixed business remains as expected and will be largely complete by FY22. We have a plan to improve our Fixed EBITDA and we are targeting a mid-teens NBN reseller margin in FY231, managing the economic impact of the legacy copper network, and accelerating our use of fixed wireless in the home where it makes sense for our customers.
“We expect our total Enterprise business to return to growth in FY22 after combining mobile, Data & IP, NAS and International, and adjacencies such as Health to contribute to our turn around.”
Mr. Penn said the company is on track to deliver $2.5 billion in net productivity by FY22, delivering $1.8 billion of this from FY16 to FY20, with another $400 million expected in FY21. This $2.5 billion target is a net figure which includes absorbing all inflation and re-investment, reduction in legacy access network costs, and COVID- 19 impacts.
Cost reductions in the 2020-21 year are expected to be achieved predominantly through indirect and direct labour, enabled by the ongoing shift of customers onto digital sales and service channels and a strong focus on vendor costs and workforce efficiency.
