Telstra cops $400m revenue hit from NBN Co connection delays

Telstra has come good on analyst sentiment that NBN Co’s latest corporate plan issued on Friday will buffet its market guidance, telling the ASX on Monday opening that its overall revenue and cash flow will take a hit because of slower than anticipated rollout.

The telco has shaved back its predicted total income by around $400 million, booking in its new range at between $25.3 billion to $27.3 billion for FY20, down from $25.7 billion to $27.7 billion.

"Telstra no longer anticipates FY20 being the year of peak nbn headwind and now estimates this will occur in FY21. The changes to forecast activations in NBN Co’s Corporate Plan 2020 also has the effect of deferring Per Subscriber Address Amount (PSAA) receipts from NBN Co in FY20 into future periods."

However the delay in the rollout has a silver lining for the local telco giant because it effectively defers some of the hit it will have to take on the government mandated network, prompting Telstra to modestly up its earnings before interest tax, depreciation and amortisation by $100 million to between $7.4 billion to $7.9 billion.

But it cautioned the effect was merely down to a matter of timing.

“Telstra confirms that the NBN Co Corporate Plan 2020 does not alter the view, provided to the market on 15 August 2019, that underlying EBITDA excluding in-year nbn headwind is expected to grow by up to $500 million in FY20,” Telstra said in a statement.

Ironically, delays in NBN connections broadly benefit Telstra because it gives the telco  more time to muscle-up new faster mobile services like 5G that could challenge the user experience of lower speed NBN plans offered by retail service providers, especially in metro areas.

Telstra had warned the market on Friday the changes set out in the NBN Co. corporate plan “including a reduction in the total number of premises forecast to be connected during FY20 from 2 million to 1.5 million” had potential to materially crimp its numbers.

NBN Co on Friday projected its average revenue per user (ARPU) for residential customers would be $49 by FY23, a new figure derived by it splitting revenue forecasts by business and residential users for the first time.

 “We don’t intend to break out business ARPU as we do not believe it is meaningful on a per-premises basis,” CEO Stephen Rue said on Friday.