Once a darling of any serious income investor’s portfolio, Telstra Corporation Ltd(ASX: TLS) has seen its share price decline by almost 30% over the past 12 months.
The company’s first half FY18 results were a mixed bag. Telstra’s total income was up 5.9% on first half FY17, but it was forced to recognise a non-cash impairment of $273 million on Ooyala, its US-based intelligent video business, which dragged reported EBITDA down 2.5% to $5.1 billion and NPAT down 5.8% to $1.7 billion.
However, excluding the Ooyala write down, underlying NPAT was still up 9.5% to $2 billion.
Increased industry competition combined with the rollout of the NBN has hurt Telstra. In first half FY18 alone the company absorbed a $370 million negative impact to EBITDA stemming from the NBN. However, Telstra has made some efforts to insure itself against these external pressures through a $3 billion strategic investment program. This includes capital expenditure on networks and digitisation which Telstra claims will deliver more than $500 million of EBITDA by FY21. So how are the other telcosperforming? TPG Telecom Ltd(ASX: TPM) is due to release its first half FY18 results to the market on Tuesday. It will be particularly interesting to note how TPG is progressing with its planned mobile network rollouts in both Singapore and Australia. The company has been investing heavily in its strategy to challenge the established mobile phone providers in these two markets. It’s a risky play, but it opens up significant growth opportunities if successful.
Shares in TPG have lost almost 6% of their value over the last 12 months. However, they have rallied impressively since hitting a 52-week low of $4.86 in September to be just over $6 now. As a shareholder, I hope that some decent first half results can continue to build momentum behind the share price.
TPM Price at posting:
$6.04 Sentiment: Buy Disclosure: Held
