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Telstra dividend cut as H1 profit falls 5%

 

Telstra has cut its dividend after the telecommunications provider's first-half profit fell almost five per cent to $1.7 billion.

Revenue from ordinary activities for the six months to December 31 rose 0.8 per cent to $12.91 billion but net profit slipped 4.9 per cent on a previously announced writedown of US streaming business Ooyala.

The telecommunications provider earlier in February warned it would write down the value of video tech firm Ooyala - which it took control of in 2014 - to zero and book an impairment charge of $273 million against goodwill and other non-current assets.

Telstra built its stake in Ooyala to 98 per cent between 2012 and 2016, but in 2016 was forced to writedown its investment by $246 million due to what it said at the time were changing market dynamics.

On Thursday, the company also announced a cut to its interim dividend to a fully franked 11 cents, down from 15.5 cents a year ago.

Telstra in August flagged a change to its dividend policy in order to fund spending on battling new competitors.

The move steered Telstra away from its historical practice of paying almost all profits in dividends, to paying 70 to 90 per cent - a ratio it says is "more in line with global peers and local large companies".

The telco on Thursday said the interim dividend will distribute $1.3 billion to shareholders by the end of March and it reaffirmed it expects to deliver a 22 cent full-year dividend.

Mobile sales revenue had increased 0.8 per cent to $5.1 billion for the half-year but fixed line revenue fell 8.3 per cent to $3 billion on the back of increasing numbers of customers migrating to the national broadband network (NBN) and additional competition.

Chief executive Andy Penn said the NBN had impacted earnings by about $870 million to date, including $370 million in the first half of the current financial year.

He said the company had performed well, overall, despite these challenges plus growing competition and technological developments including the transition to 5G.

"The impact of the NBN, along with increased competition, highlights the importance of the up to $3 billion strategic investment program, and we are on track to deliver economic benefits from this of more than $500 million of earnings by FY21," Mr Penn said.