Telstra Cuts Profit Forecast on NBN Delay, Reaffirms Payout View

(Bloomberg) -- Telstra Corp., Australia's biggest phone company, expects a A$600 million ($453 million) hit to profit this year after the government-run NBN Co. suspended sales of broadband connections that run over pay TV cables.

Earnings excluding some items for the year ending in June will be A$10.1 billion to A$10.6 billion, Melbourne-based Telstra said in a statement Friday, lowering a previous forecast. Analysts, on average, project about A$10.9 billion, according to data compiled by Bloomberg. The company still plans to pay a total dividend of 22 Australian cents a share.

NBN, which is rolling out a country-wide broadband network, pays Telstra to use its infrastructure. The latest delay only affects the current year, Telstra said, adding it expects the move to be “modestly financially positive” by the time NBN completes its network in 2020.

Australia's telecommunications industry has been facing pressure from NBN, with Telstra projecting the network roll out will reduce Ebitda by A$3 billion. That contributed to the company's decision in August to cut its dividend for the first time. Telstra stock has fallen 33 percent this year.

Earlier this week, NBN said it was suspending sales on so-called hybrid fiber co-axial cable starting Dec. 11 for as long as nine months. The nation's biggest-ever infrastructure investment has turned into a political football, plagued by cost overruns and construction delays. As customers switch over to the NBN, frustration with download speeds is boiling over. Last month, Telstra agreed to compensate 42,000 users for slow NBN speeds.

To contact the reporter on this story: Zoe Ma in Sydney at zma13@bloomberg.net.

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Vivek Shankar

©2017 Bloomberg L.P.