Telstra share price: where next following H1 results?

Telstra share price: a modest bounce

Telstra (ASX: TLS) – Australia’s leading blue-chip telco – today reported a dependable set of half-year results that were in-line with expectations. In step with that, the share price rose, if only by a touch, up 0.64% in the first 30-minutes of trade, to $3.85 per share.

The stock however fell as much as 1.83% a little after 10:40 (AEDT), after it was revealed that the TPG-Vodafone merger, which was previously blocked by the ACCC, would be going ahead afterall.

Unfolding news aside, on the top-line, Telstra reported total first-half income of $13.4 billion and earnings (NPAT) of $1.2 billion, representing decreases of 2.8% and 6.4%, respectively.

Mobile, making up a significant 44% of the telco’s revenue, grew by 0.3% in the half – to $5.3 billion.

Telstra now has a total of 18.5 million domestic retail customer services online.

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On the bottom-line, underlying earnings (EBITDA) declined 6.6%, coming in at $3.9 billion. When excluding in-year NBN headwinds however, the telco was keen to point out that these earnings 'grew by approximately $90 million, the first time this figure has grown since FY16.'

The company also continued to aggressively cut costs during the half, reducing fixed costs by $422 million – representing a 12.1% reduction. Total underlying fixed costs have now decreased by $1.6 billion since FY16. The company is targeting a $2.5 billion reduction in costs by FY22.

Finally, the Board announced a fully-franked interim dividend of 8 cents per share – made up of a 5 cent ordinary interim dividend and a 3 cent special dividend.

The 5G equation in focus

Telstra's CEO, Andrew Penn speaking of the telco’s focus on technological innovation, said:

'Telstra's ongoing research and investment continues to make Australia a global leader in 5G,' with it being further added that 'as the 5G ecosystem develops, we are seeing more devises becoming available to our customers.’

Looking at this from a product level, it was noted that Telstra launched the 5G enabled Samsung Galaxy A90 in November. Promisingly, it was added that:

‘One quarter of all our Android phone sales since July 2019 have been 5G devices. In total, we have sold more than 100,000 5G-enabled mobile devices and we look forward to that number continuing to grow.'

Interestingly, Apple is yet to release a 5G-enabled phone, though many have speculated that the next Apple iPhone will be underpinned by 5G technology.

Where next: things remain on track

Looking forward, Telstra (ASX: TLS) today took the chance to reaffirm FY20 guidance, with management expecting total full-year income in the range of $25.3 billion to $27.3 billion. On the bottom-line, FY20 earnings (underlying EBITDA) are expected to come in at between $7.4 billion to $7.9 billion.

Across Telstra’s three key financial metrics: Total Income, Underlying EBITDA and Free Cash Flow (FCF) – the telco remains on track to meet market guidance, it was noted.

At the $3.85 mark, the Telstra share price now trades ~19% higher than it did one year ago.

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