The following is a press release from S&P Global Ratings: MELBOURNE (S&P Global Ratings) Feb. 13, 2020-- S&P Global Ratings today said that Telstra Corp. Ltd. (A-/Stable/A-2) will benefit from lower competition and the company's good progress in its T22 restructuring initiatives. The Federal Court has passed a decision to overrule the Australian Competition and Consumer Commission's decision to block the merger of TPG Telecom and Vodafone Hutchison Australia. In our opinion, Vodafone's merger with TPG reduces the risk of a flare-up of price competition and increased capital expenditure associated with a fourth mobile network operator aggressively entering the market. In recent years, the Australian mobile market has become susceptible to periodic bouts of intense competition. We assess Telstra's competitors to have less balance-sheet capacity and a greater incentive to generate cash compared with past periods. Telstra's results for the first half ended Dec. 31, 2019, were in line with guidance and market expectations. Notably, Telstra arrested the decline in its earnings. Underlying EBITDA (company's measure, excluding costs of the National Broadband Network [NBN] rollout) grew about A$90 million against the prior corresponding period's, representing the first period of growth since fiscal 2016. The company expects this momentum to continue through to the second half. Underlying fixed costs (company's definition) reduced by net A$1.6 billion against Telstra's fiscal 2022 target of A$2.5 billion, although the momentum is expected to slow in the second half. Telstra is about 60% through its recurring NBN rollout and expects the associated earnings headwind to peak during fiscal 2021. In our view, the mobile market remains challenging, underscoring the need for Telstra to focus on cost competitiveness. The mobile segment now represents about 50% of the group's underlying EBITDA. During the first half, reduced costs and margin stabilization offset lower service revenue. The company expects the decline in its average mobile revenue per user to slow in the second half and mobile gross margins to recover to modest growth in fiscal 2021. Telstra's fixed-line segment continues to suffer from the NBN migration and intense competition. We believe Telstra's T22 strategy should enable the company to respond to changing industry dynamics over the long term. Telstra is about halfway in implementing its most comprehensive restructuring program. The restructure aims to simplify the business, maintain a competitive cost base, maximize the value of its assets, and sustain network superiority. Telstra adopted the new Australian Accounting Standards Board (AASB) 16 lease accounting standard for first-half 2020. As a result, the company recalibrated its debt-servicing comfort zone to between 1.5x and 2.0x from 1.3x to 1.8x. Excluding the impact of AASB16, net debt reduced (company's measure) during the first half. Meanwhile, free cash flow increased 36%, primarily due to lower capital expenditure. We expect Telstra's planned investment in fifth generation (5G) network to buttress its network superiority. The company's capital expenditure guidance remains at A$2.9 billion-A$3.3 billion, including investment in the 5G network rollout. Telstra expects its 5G network to reach at least 35 cities by the end of 2020. This report does not constitute a rating action. AUSTRALIA S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act). 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