Telstra revises FY18 guidance for nbn

• FY18 reductions due to HFC cease sale and updated nbn corporate plan
• Guidance unchanged outside updated nbn rollout and disconnection assumptions
• FY18 expected dividend reaffirmed at 22 cents per share
Friday 1 December 2017 – Telstra today revised FY18 guidance as a result of the impact of nbn co’s
announcement that it would cease sales on hybrid fibre co-axial (HFC) technology for six to nine
months from 11 December 2017, as well as nbn co’s Corporate Plan 2018.
Telstra also reaffirmed it expects FY18 total dividend to be 22 cents per share fully franked including
ordinary and special, in accordance with its dividend policy announced in August 20171.
Telstra’s FY18 guidance included an assumption that the nbn rollout would be broadly in accordance
with the nbn Corporate Plan 2017. nbn co subsequently issued its Corporate Plan 2018 on 31 August
2017. This change reduced the number of brownfields Ready For Service (RFS) premises and
included a reduction of 200,000 brownfield activations in FY18 relative to the previous Corporate
Plan, which has a negative impact on Telstra’s expected FY18 Per Subscriber Address Amount
(PSAA) and one-off Infrastructure Services Agreement (ISA) ownership receipts.
While this change impacted Telstra’s financials, the impact did not result in Telstra’s outlook falling
outside of its guidance range. However, with the addition of the delays from the nbn cease sale of
HFC announced earlier this week, Telstra’s outlook is now outside of the guidance range and has
been updated accordingly.
The revised guidance, incorporating the 31 August 2017 change and 27 November 2017 change to
HFC, assumes operating earnings are otherwise unchanged. The net impact and revised FY18
guidance is as follows:
Measure FY17 Previous FY18
Guidance
FY18 Guidance updated Change (nbn rollout impact)
Total income2 $28.2b $28.3b to $30.2b $27.6b to $29.5b $0.7b reduction
EBITDA $10.7b $10.7b to $11.2b $10.1b to $10.6b $0.6b reduction
Net one-off nbn DA receipts less nbn net C2C3
$1.3b $2.0b to $2.5b $1.4b to $1.9b $0.6b reduction
Capex $4.6b $4.4b to $4.8b $4.4b to $4.8b No impact
Free cashflow $4.3b $4.4b to $4.9b $4.2b to $4.7b $0.2b reduction
The most significant impact from a timing perspective is the proportion of one-off receipts (including
PSAA and ISA ownership receipts) to Telstra from nbn being delayed into future periods. The revenue
recognition from Telstra’s commercial works contracts with NBN will also be delayed.
There will be benefits, including lower nbn costs to connect (C2C), lower network payments to nbn
and retained wholesale EBITDA, which will partially mitigate the reduction in one-off receipts. Further
details are provided below.
While the nbn rollout delay impacts Telstra’s outlook for FY18, it is anticipated the delay will be
modestly financially positive to Telstra over the full rollout due to the effects of a natural hedge. It is
noted that nbn co remains committed to completing the rollout by 2020.

Footnote to guidance
Previous: “This guidance assumes wholesale product price stability and no impairments to investments, and
excludes any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The
guidance also assumes the nbn™ rollout is broadly in accordance with the nbn Corporate Plan 2017. Capex
excludes externally funded capex.”
Revised: “This guidance assumes wholesale product price stability and no impairments to investments, and
excludes any proceeds on the sale of businesses, mergers and acquisitions and purchase of spectrum. The
guidance also assumes the nbn™ rollout is broadly in accordance with the nbn Corporate Plan 2018 adjusted for
a cease sale on hybrid fibre co-axial (HFC) technology for six to nine months from 11 December 2017. Capex
excludes externally funded capex.”
Guidance range details by measure
Total income: reduced by $0.7 billion due to delays in:
• one-off PSAA and ISA ownership receipts (associated with lower expected in-year nbn
disconnection and ready-for-service volumes)
• one-off hardware revenue associated with nbn connections
• Income recognition of nbn commercial works sale of assets
• recurring nbn ISA receipts
• offset partly by retained wholesale income
EBITDA: reduced by $0.6 billion consistent with net one-off nbn DA receipts less nbn net C2C impact.
Outside the one-off impact, delays in recurring impacts to EBITDA offset including:
• delayed revenue recognition of nbn commercial works sale of assets and recurring nbn ISA
receipts
• partially offset by retained wholesale EBITDA and lower nbn network payments
Net one-off nbn DA receipts less nbn net C2C: reduced by $0.6 billion due to:
• delayed one-off PSAA and one-off ISA ownership receipts (associated with lower expected in
year nbn disconnection and ready for service volumes)
• net of nbn net cost to connect (C2C) in year savings
Capex: not impacted.
Free cashflow: reduced by $0.2 billion mostly in:
• delayed one-off PSAA and ISA ownership receipts received quarterly in arrears
• partly offset by lower nbn costs to connect, network payments to nbn and tax

courtesy of Bell Direct
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( DYOR )

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