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NBN dragging Telstra down, carrier wants 5G to haul it up again

CEO blames 'nationalisation' for limp financials, like The Simpsons can't defend ARPU

Australia's National Broadband Network (NBN) continues to white-ant the business of dominant local carrier Telstra, which yesterday cut its earnings guidance yesterday.

It's hardly good news for the company building the NBN, nbn™, because while Telstra added 38,000 subs in the third quarter of 2018, what those users are spending on their bundles fell by 2.4 per cent. One of nbn™'s most intractable problems is how to grow its monthly average revenue per user (ARPU), so a decline from the retailer which holds 50 per cent of NBN connections will be unwelcome news.

Telstra told the Australian Securities Exchange yesterday investors should expect its 2018 earnings to be closer to AU$10.1 billion than the $10.6 billion it previously forecast.

Mobile ARPU is one pressure-point, CFO Warwick Bray told yesterday's analyst presentation, and the NBN is the other, reducing both fixed line revenue and fixed broadband ARPU.

The combined impact of the NBN is decline of about $3 billion in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) for the year, Bray told the call, and growing subsrciptions (particularly in mobile) haven't offset that.

Postpaid mobile ARPU declined by 3.6 per cent compared to the third quarter of 2017, while 60,000 subscribers were added.

Telstra claimed, however, that its launch this year of “unlimited” mobile broadband plans hadn't hurt ARPU, because people taking up the offer were mostly migrating from other top-end plans.

Bray refused to comment on the international controversies surrounding Chinese vendor ZTE, but said Telstra is confident in its ability to avoid any taint in its own dealings with the company, saying: “we have the strongest supplier governance and policies and we will always review new material, and so we will review new material about all of our suppliers.”

Last week, Telstra stopped selling ZTE phones and WiFi gear.

ZTE has been named as a possible supplier of Telstra's 5G network. Whether it retains that status is, for now, out of Telstra's hands, since America's recently-implemented trading ban drove the company to cease production. With hundreds of thousands of job losses on the cards in China, a policy-Tweet from President Donald Trump said he'd try and find a way the outfit can continue trading.

With 5G on the way, all telcos hope to turn the network into more than a bit-pipe, and CEO Andy Penn reiterated this to a JP Morgan audience today, saying “The crucial question for the sector is how the telcos capture a bigger share of the economic value that will be generated by 5G than we did with 4G”.

Transcripts of Bray's and Penn's speeches are here. ®

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