TLS Telstra lifts earnings as mobiles and cost discipline drive cash generation
Telstra has delivered a stronger first half, with mobiles growth, tighter costs and lower capex pushing double‑digit gains in cash earnings, a higher dividend and an expanded buy‑back
“The first half of FY26 was a strong period for Telstra – we grew earnings, strengthened cash flow and took important steps in our Connected Future 30 strategy, doubling down on connectivity to support Australia’s digital future while returning more to our shareholders.” Telstra earnings lift on mobiles and tighter cost base Telstra’s underlying EBITDA after leases rose 5.5% to 4.2 billion in H1 FY26, with growth across Mobiles, Fixed Consumer & Small Business (CSB), InfraCo Fixed and Amplitel offsetting weakness in Enterprise and legacy wholesale. Cash EBIT jumped 14% to 2.5 billion and cash earnings climbed 17% to 1.6 billion, reflecting positive operating leverage and a 5.2% reduction in BAU capex. Earnings per share increased 11% to 9.9 cents, while cash EPS rose 20% to 14.0 cents as higher earnings flowed more efficiently through to cash. The board declared an interim dividend of 10.5 cents per share, up from 9.5 cents a year ago and 90.5% franked, and lifted the current on‑market buy‑back from up to 1.0 billion to up to 1.25 billion after repurchasing 637 million of stock in the half. Return on invested capital improved 0.8 percentage points to 8.8%, with underlying ROIC up 0.9 percentage points to 8.9% on stronger profitability. Segment performance: mobiles, fixed and infrastructure Mobiles remained the key engine of growth, with mobile services revenue up 5.6% and underlying mobile EBITDA rising 3.6% or 93 million. ARPU increased across postpaid (+4.8%), prepaid (+14.7%) and wholesale, supported by handheld price rises and higher usage, while mobile handheld users grew by 135,000 in the half to 14.7 million. Fixed CSB delivered a 20.2% uplift in EBITDA to 220 million, driven by 3.6% bundles data ARPU growth from price increases, mix and 5G fixed wireless, alongside continued cost discipline. Income in Fixed CSB declined 2.5% as nbn SIO and legacy voice lines fell, but management highlighted early traction from 5G fixed wireless net adds and the launch of Internet Only plans and the new Wi‑Fi 7 Smart Modem 4. By contrast, Fixed Enterprise EBITDA fell 9.4% to 87 million on a 4.9% income decline as data connectivity and NAS revenues continued to be reshaped through portfolio exits, product rationalisation and customer credits. NAS EBITDA grew modestly as cost actions offset calling and equipment sales decline, while DAC margins compressed as revenue fell faster than costs. International EBITDA was broadly flat (–2 million) with growth in Wholesale Enterprise and Digicel Pacific offset by one‑offs. Telstra’s domestic infrastructure platforms continued to perform well, with InfraCo Fixed EBITDA up 3.0% and Amplitel EBITDA up 5.3% on stronger nbn contributions, tenancy growth, pricing and cost efficiencies. Across the group, underlying operating expenses fell 2.4% (179 million), and total Cash EBIT costs (opex, leases, BAU capex and spectrum amortisation) declined 2.9%, delivering operating leverage of 3.1 percentage points despite only 0.2% underlying income growth. Capital and financial position Net debt increased modestly to 16.8 billion, maintaining a debt‑servicing ratio of 1.9x within Telstra’s 1.75–2.25x comfort zone. The group reported strong liquidity with 1.4 billion in cash and 3.8 billion of undrawn committed facilities, underpinned by a diversified funding base across bond markets and bank loans. Average cost of debt edged down to 4.8%, and Telstra retained investment‑grade credit ratings of A‑ from S&P and A2 from Moody’s. Underlying cashflow before dividends, buy‑backs and net borrowings rose sharply to 1.4 billion, supporting both the higher interim dividend and the 637 million of share buy‑backs completed in the half. Management reiterated its commitment to disciplined capital management, balancing strategic investment in Aura and Viasat with ongoing shareholder returns. What’s next… Telstra tightened its FY26 underlying EBITDAaL guidance range to 8.2–8.4 billion, from 8.15–8.45 billion, and reaffirmed BAU capex of 3.2–3.5 billion, Cash EBIT of 4.55–4.75 billion and strategic investment capex of 0.3–0.5 billion. Near‑term earnings momentum is expected to remain anchored in mobiles ARPU and subscriber growth, continued cost and capex discipline, and incremental contributions from InfraCo Fixed and Amplitel. Key execution drivers for the next 12–18 months include stabilising broadband SIOs while monetising higher‑value fixed plans, completing the reset of Fixed Enterprise through further simplification and divestments, and delivering milestones on Aura intercity fibre and Viasat to underpin long‑term digital infrastructure returns. The Connected Future 30 strategy targets mid‑single digit cash earnings CAGR and underlying ROIC of around 10% by FY30, with management signalling that positive operating leverage and portfolio management will be central to hitting those goals.
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