Telstra cuts earnings forecast, blames NBN
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Telstra cuts earnings forecast, blames NBN

Investors shrugged off Telstra's move to cut to its revenue and earnings forecasts, as the monolith telco appointed a new senior executive to spearhead its product and technology strategy which will underpin its push into 5G mobile services.

Telstra on Thursday was forced to slice $100 million from its projected range for full-year earnings (before interest, tax, depreciation and amortisation) due to ongoing delays with the national broadband network rollout.  The carrier also lowered revenue forecasts by $300 million.

It now expects earnings for the current financial year to fall between $8.7 billion to $9.4 billion, and revenue to fall between $26.2 billion and $28.1 billion

Last week, NBN released an updated business plan, in which it lowered its own projections for connections to the new wholesale network. The government-owned business also increased the cost of the mammoth but beleaguered project by $2 billion to $51 billion.

Telstra has adjusted its forecasts to account for the NBN plan published late last month.

Telstra has adjusted its forecasts to account for the NBN plan published late last month.

Photo: Glenn Hunt

NBN last November "paused" connections to the new wholesale via pay-TV cables while it addressed dropouts being experienced by a “minority” of the 370,000 customers already connected.

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Telstra shares rose on Thursday 3.31 per cent to $3.12 in a falling market,  with portfolio managers citing a rotation by investors into defensive stocks amid the broader sell-off.

On Thursday, Telstra also announced it had appointed former Deutsche Telekom executive Christian von Reventlow to run its newly created product and technology division.

Mr von Reventlow, who has also worked at tech companies including chipmaker Intel, is the final addition to chief executive Andy Penn's senior leadership following a major structural overhaul in July.

The overhaul saw several executives removed from their positions including chief financial officer Warwick Bray and Stephen Elop, the former Nokia CEO who was brought in to lead its technology push.

Mr von Reventlow will be responsible for Telstra's "products strategy, product lifecycle, and technology and innovation where products are incubated and brought to scale,” Mr Penn said in a statement.

“As I said when announcing our new structure in July, at the heart of the changes is the simplification of our products and services built on new technology," Mr Penn said in a statement.

"The new end-to-end products and technology function will significantly increase our technical capabilities around product development and management.”

Telstra has been struggling in the face of a challenging telecommunications market, with steep wholesale costs on the NBN hurting fixed line margins and a price war in the mobiles threatening returns.

The company cut its cherished dividend in 2017 and changed its policy around shareholder payouts.

In June, Mr Penn announced plans to slash $2 billion in costs over the next four years, including plans to cut 8,000 jobs. He also set up a new business unit housing Telstra's infrastructure assets, which could eventually be spun off to investors.

Shares in Telstra have fallen by about 15 per cent so far in 2018, compared to a rise of nearly 2 per cent for the broader market.

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With Reuters