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With a large proportion of the Australian population following the work from home practice to meet business requirements amidst coronavirus lockdown, the telecommunication service providers are facing unprecedented network demand.
Telecom company, Telstra Corporation Limited (ASX:TLS) recently notified that broadband and mobile phone calls usage has increased by up to 30 per cent during the coronavirus crisis.
However, several customers of Telstra have started reporting issues with their mobile connections across Australia amidst this phenomenal demand. Due to a surge in coronavirus cases across the globe, including Australia, more and more people are trying to connect with government lines or sign up for government services, further adding to the congestion.
Moreover, owing to recent lockdowns in the world's major call centre hubs, India and Manila, Telstra users are encountering longer wait time problems while contacting helpline centres. Due to the reduction of individuals on its global operations centres, the Company has lately withdrawn the service allowing landline customers to transfer their landline numbers.
However, it is worth pointing out that Telstra is trying hard to bring most of their call centre services onshore for the smooth operation of its business.
Telstra All Set to Tackle Unprecedented Network Demand Amidst COVID-19
To help deal with the enormous demand of its network services, the Company has recently announced that it will hire 1,000 of workers to meet the call centre shortfall, especially stood down Qantas Airways Limited (ASX:QAN) staffers. The Company has already received over 5000 applications for these positions.
Exhibiting leadership responsibility, the Company has decided to put on hold its planned job cuts under T22 plan for six months and scrap late bill payment fees for consumers and small businesses till April end. Additionally, the Company has brought forward $500 million of capital expenditure from the 2nd half of FY21 into CY 2020.
The Company has planned to use this capital to increase its network capacity, including accelerating the roll out of 5G further and injecting urgently needed investment into the economy. To offer connectivity to its business customers, the Company has also introduced a Satellite Services (TnSS) offering for coverage through NBN’s throughput satellites across Australia.
Moreover, the Company has extended any sponsorships expiring in 2020 for another one year, offering more certainty to its partners and supporters.
Prior to announcing these measures, the Company declared unlimited data access to all of its home broadband customers until April end. Besides, the Company offered extra mobile data for its small business customers and consumers and extra paid leaves for its employees and casuals.
Standing firm on its commitment, the Company did not withdraw its interim dividend, to be paid this week, which involves the distribution of $951 million to its shareholders.
These measures signify the Company is trying every possible course to deal with the adverse impacts from coronavirus crisis.
Telstra’s Robust Performance in 1H FY20
Telstra reported its 1H FY20 results for the period ended 31st December 2019, on 13th February 2020, which were largely in line with the Company’s expectations. The Company reported strong progress on its T22 strategy during the period, with about 2.4 million services on its novel and radically simplified plans.
Moreover, the Company recorded an increase in digital service interactions to 57 per cent, with 26 per cent of its small businesses and consumer transactions being digital.
The Company’s multi-brand strategy also produced large growth in customer numbers, especially in mobile during the period. Its business added 137k retail postpaid mobile services, including 135k retail prepaid mobile services, 91k from Belong and 173k pre and postpaid and IoT Wholesale services over the half-year.
Additionally, the Company stated that more customers than ever are now relishing the access to its 5G mobile network, supported by an expanded range of 5G-enabled devices.
Key Financial Updates of 1HFY20
Telstra’s Reported total income and Reported NPAT fell by 2.8 per cent and 6.4 per cent to $13.4 billion and $1.2 billion, respectively during the half year. The Company recorded an EBITDA of $4.8 billion for the first half on a reported basis.
The Company’s underlying EBITDA also declined by 6.6 per cent to $3.9 billion during the period; however, its underlying EBITDA excluding the in-year nbn headwind, rose by about $90 million, for the first time since FY16.
Mr Penn mentioned that Telstra’s ongoing efforts to simplify the business, along with its progress on T22 strategy, helped lower underlying fixed costs by 12.1 per cent or $422 million over the half-year, bringing forward the total underlying fixed cost reductions to ~ $1.6 billion since FY16.
In addition, the Company informed about payment of an interim dividend of 8 cents per share (fully franked), involving an interim special dividend of 3 cents per share and an interim ordinary dividend of 5 cents per share.
Highlights of FY20 guidance
- Underlying EBITDA – Between $7.4 billion and $7.9 billion
- Total Income – Between $25.3 billion and $27.3 billion
- Capital expenditure - Between $2.9 billion to $3.3 billion
- Restructuring Costs - $300 million
- Free cash flow post payment of operating lease - Between $3.3 billion and $3.8 billion
It is worth mentioning that Telstra is leaving no stone unturned to retain the stability of its business amidst coronavirus crisis. The Company is holding up and performing reasonably well in this challenging phase, in addition to showing a real corporate social responsibility.
TLS is trading at $3.140 on 26th March 2020 (11:43 AM AEDT).
