February 12, 2020 / 9:56 PM / in 11 days

UPDATE 1-Australia's Telstra posts drop in half-year profit as NBN headwinds persist

(Adds outlook, background)

Feb 12 (Reuters) - Australia’s largest telecom company Telstra Corp posted a near 8% drop in half-year profit on Thursday, hurt by persistent pressure from the rollout of a state-owned broadband network, which hurt its fixed-line revenue.

While Telstra dominates Australia’s mobile and broadband markets, its mainstay fixed-line business has come under pressure from the roll-out of National Broadband Network (NBN), which replaces copper wires laid by firms across the continent with a fibre-optic system that telcos must pay to access.

As a result, the Melbourne-based company’s fixed-line revenue fell nearly 11% to A$2.39 billion ($1.61 billion), while revenue from mobile services, its largest business, grew only marginally by 0.3% to A$5.31 billion.

Telstra also said it recorded one-off costs for bushfires of around A$10 million during the first half, adding that it expected the total impact of bushfires to be A$50 million.

Later today, an Australian court will decide whether to block a A$15 billion merger between TPG Telecom and Vodafone’s Australian joint venture. If it does get the go-ahead, it may threaten Telstra and No.2 player, Singapore Telecommunications Optus.

The company reconfirmed its core earnings forecast of A$7.4 billion to A$7.9 billion for fiscal 2020, and said it was on track to achieve its target to reduce costs by A$2.5 billion by fiscal 2022.

Net profit fell to A$1.14 billion ($767.90 million) for the six months to Dec. 31, from A$1.23 billion a year earlier, while its declared total interim dividend of 8 Australian cents per share was the same as the previous year.

$1 = 1.4846 Australian dollars Reporting by Shriya Ramakrishnan and Shruti Sonal in Bengaluru; Editing by Shailesh Kuber, Bernard Orr

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