Telstra (ASX: TLS) has cut down its income and earning guidance due to slower than expected rollout of National broadband network.
In a market release today, Telstra announced revised FY19 guidance following the new nbn corporate plan released on 30 August 2018. The telecom giant brings down its income expectations by $300 million for the current financial year, lower than previous expectation, ranging between $26.5 billion to $28.4 billion.
Telstra’s revised guidance also hit $100 million cut in its expected earnings, as earnings before interest tax depreciation and amortization shifted down to $8.7 billion - $9.4 billion from the previous estimates of $8.8 billion - $9.5 billion.
This comes after nbn corporate plan 2019-2022 tabled lower than expected estimates in premises ready-for-service and premises activated in FY19. As per the updated nbn plan, the company expects approximately 1.2 million brownfield premises to be activated, less than previously achieved activation of 1.5 million brownfield in FY18.
As a result, Telstra is forced to face the effect of deferring Per Subscriber Address Amount (PSAA) payment that nbn must make to Telstra every time premise is declared ready. This is to be offset by expected benefits from lower nbn cost to connect, retained wholesale EBITDA and lower network payments to nbn. Subsequently, Telstra has brought down Net one-off nbn DA receipts less nbn net C2C by $200 million.
However, Telstra expects the positive results from these financial changes over the full rollout of nbn plan, mainly driven by the effect of natural hedge.
"While the lower volumes impact Telstra's outlook for [2018-19], it is anticipated these changes will be financially positive to Telstra over the full rollout due to the effects of the natural hedge," Telstra said in an ASX statement.
Furthermore, the company states that guidance outside updated nbn rollout remains unchanged.
Today, Telstra’s stock is trading at a share price of $3.115, recording positive daily price change of 3.146%. However, the stock has seen the performance change of -15.72% over the past one year.
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