Telstra Group Limited

Good morning and welcome to Telstra's results announcement for the half year ending 31st of December 2025. I am Nathan Burley, Head of Investor Relations. I am joining today from the lands of the Gadigal people and on behalf of Telstra, I acknowledge and pay my respects to the traditional custodians of country throughout Australia and recognise the continued connection Australia's First Nations people have to land, waters and cultures. We pay our respects to elders past and present. This morning we will have presentations from our CEO, Vicky Brady, and our CFO, Michael Ackland. We will then open to questions from analysts, investors, and then the media. I will now hand over to Vicky.

Thank you, Nathan, and good morning, everyone, and thank you for joining us. I'll make some comments reflecting on Telstra's overall performance and our outlook. Michael will then cover the details of our financials. The first half of FY26 was a strong period for Telstra. We delivered ongoing growth in earnings, reflecting momentum across our business, strong cost control and disciplined capital management. We also made a positive start to our Connected Future 30 strategy, which will see us double down on connectivity, drive growth and play a critical role in enabling a prosperous digital future for Australia. In first half 26, reported financial performance compared to the prior period included EBITDA up 4.9% to 4.2 billion, EBIT up 9.2% to 2 billion, Profit for the period, or NPAT, up 8.1% to $1.2 billion. Earnings per share up 11% to $0.09. And return on invested capital up 0.8 percentage points to 8.8%. Our underlying growth more accurately reflects our financial performance compared to the prior period. Underlying financial performance showed underlying EBITDAL up 5.5% to $4.2 billion, cash EBIT up 14% to $2.5 billion, cash EPS up 20% to $0.14, and underlying return on invested capital up 0.9 percentage points to 8.9%. On the back of cash earnings growth, the board resolved to pay an interim dividend of 10.5 cents per share. The interim dividend is 90.5% franked, with a franked amount of 9.5 cents per share and an unfranked amount of 1 cent per share. The interim dividend uplift and the level of franking applied is consistent with our capital management framework and our aim to deliver a sustainable and growing dividend. Our dividend is supported by strong cash earnings this half and our Connected Future 30 ambition remains to deliver mid-single digit growth in cash earnings. Today we are also announcing an increase in our current on-market share buyback from up to $1 billion to up to $1.25 billion. This increase is supported by strong progress in completing $637 million of the buyback in the half, earnings growth and the strength of our balance sheet. The on-market share buyback is expected to support earnings and dividend per share growth, and along with the increased interim dividend, reflects the Board and management's confidence in our financial strength and outlook. Now that we've completed our first half, we are tightening our FY26 underlying EBITDA guidance to between $8.2 billion and $8.4 billion. Our guidance on other measures are unchanged. Looking now at our results across the business, we grew underlying EBITDA across our mobiles, fixed consumer and small business, infra-co-fixed and Amplitel businesses. Importantly, our mobile business has continued to perform well, with EBITDA growth of 93 million. Mobile's growth was driven by higher ARPU and more customers continuing to choose our network and the value it provides. Mobile services revenue grew by 5.6%. Our fixed CNSB EBITDA grew by $37 million, reflecting ARPU growth and disciplined cost management. We introduced our internet only plans late in the half and customers now also have access to our Telstra Smart Modem 4 with next generation Wi-Fi 7 technology. With these new offerings in place, we're focused on stabilising customer numbers and driving growth. Our fixed enterprise EBITDA declined by 9 million, as we continue to reset this business, including through portfolio management and reduced costs. We remain committed to this reset, with further changes proposed last week to continue removing complexity. Our international EBITDA declined by 2 million, but grew excluding one-offs. Michael will go through this in detail. Our domestic infrastructure businesses across InfraCo Fixed and Amplitel continue to grow, reflecting strong customer demand. Across the business, we achieved 14% cash EBIT growth. This percentage growth rate is higher than the rate we expect at the full year, largely due to lower BAU capex in the first half. Our full year cash EBIT guidance is equivalent to around 5% to 10% annual growth. We delivered positive operating leverage of 3.1 percentage points in line with our Connected Future 30 target. Given the low level of income growth in the period, we achieved operating leverage largely through strong cost discipline and efficiency gains. We reduced underlying operating expenses by $179 million, or 2.4%, more than offsetting pressure from rising costs. This required challenging but necessary decisions to reduce some roles and set us up to deliver on our Connected Future 30 ambitions. We're also seeing efficiency gains flow from technology leadership as an important enabler of our strategy. This includes modernising our software practices, relentless simplification, strong adoption of AI and an API-first architecture. For example, we've consolidated our software partners from 400 down to two, improved efficiency in our software development by more than 20%, and sped up time to market and release cycles by 15 to 20%. And most importantly, we're seeing benefits to customers, which I'll come to shortly. Turning to our strategy, our ambition is to be the number one choice for connectivity in Australia. Achieving that in a changing environment means radically innovating in the core of our business. You can see the layers and enablers of this strategy on this slide, which we covered in our last Investor Day. There is a more detailed scorecard in the appendix that shows our progress, so I won't go through that in detail. But I will make some comments on the importance of connectivity and call out some highlights from the half. Connectivity is foundational to supporting national productivity, resilience and security. As reliance on telco networks grows and service expectations rise, continued investment in digital infrastructure is fundamental to better delivering services to consumers and business. Investment needs to be supported and encouraged, and the investment required across the sector will be large in the multi-billions of dollars. To do this well, we need to have a shared national vision for the digital future we want to create for Australia and a national digital infrastructure plan our sector can align behind with government and regulators. This must include a plan to use Spectrum to the greatest possible benefit to consumers and businesses. To do that, we need certainty of Spectrum allocation on fair terms at a fair market price. We also need better regulation, designed for but agnostic to the technology of today. We need forward-looking guardrails that both protect consumers and encourage innovation to deliver better outcomes for them and the nation. We welcome the Productivity Commission's proposal for a deep dive review of regulation in the telecommunications sector. We want to work with government, regulators and the sector on a shared vision for Australia's digital future so we can better align policy, regulation and decision-making with the goals we have as a country. On investing in connectivity, we are driving significant momentum in the build of our Aura network and managing this large, complex project with discipline. The network will be vast, connecting our capital cities with ultra-fast and reliable fibre and the ability to connect regions too. This week we reached the halfway mark with 7,000 kilometres of fibre in the ground. Our Sydney to Melbourne coastal via Canberra routes are now live and more routes are expected to be completed in FY26, including Sydney to Melbourne central via Canberra and Sydney to Perth. We are on track to achieve a one-point uplift in our network experience index, which brings together network availability and speed across our mobile and fixed networks to measure the real experience our customers receive. The uplift is a result of our ongoing program of network optimisation and early benefits from our additional investment over four years in 5G advanced capability. It also reflects improvements in resilience. For example, we have invested to strengthen backup power across our network sites, which were able to withstand more than 95% of the 165,000 planned and unplanned power interruptions we experienced over FY25. While there's always more to be done, these investments and others contributed to Telstra receiving the 2025 Best in Test Mobile Network Award from Umlaut for the eighth year in a row and with our highest score ever. In June last year, we became one of the first operators in the world to launch satellite messaging. And while it's not a replacement for terrestrial networks, we're seeing it add another layer of resilience when terrestrial networks are disrupted. For example, when fire damage and power disrupted our network during the recent bushfires in Victoria, particularly around Longwood and Harcourt, we saw a threefold increase in people connecting to satellite messaging, even though many people had evacuated this area. On supporting customers, we have migrated more than 99.9% of our 7.7 million consumer customers to our new digital stack. We continue to work with around 4,000 of our customers who are the most complex to migrate, and we are managing that thoughtfully. Our team know these customers as individuals as we work through this with each of them, and we're committed to getting it done. We're seeing significant improvements in customer experience from digitisation and AI. 86% of consumer service interactions like billing, order tracking or prepaid recharge are now completed through our digital self-service instead of customers having to call us. In November, we launched an AI-powered assistant, which customers can access on Telstra.com to get help with simple things like checking their plan, activating a SIM, or how to reset a password. This is our first customer-facing generative AI assistant, and it has meant an almost threefold increase in customers being able to resolve their inquiry using AI. We plan to scale this AI-powered assistant across our My Telstra app over this quarter. It is just one example that we have many more AI use cases across the business, helping us serve customers better, strengthen network resilience, protect customers from scams, and solve issues before they become problems. Overall, our investment in digitisation and AI, combined with our ongoing network and capability investment, is helping to drive improvements in customer experience. Over the 12 months, we've seen strategic MPS increase by five points and episode MPS increase by two points. At the same time, we have been laying the foundations of our Connected Future 30 strategy, and there are three things I'll call out here. The first is innovating in core connectivity, capability and how we capture value. In mobile, our investment in 5G Advanced is moving us towards a smarter, more adaptable and programmable network. In FIX, we launched our Adaptive Network Centre in June last year, a self-service platform that empowers our enterprise customers, partners and Telstra teams to design, order, track, manage and monitor connectivity services, all in one place. These capabilities are both fundamental to enabling our network as a product layer, and we continue to drive momentum. The second is our work under our joint venture with Accenture to transform our business with AI. We have made good progress since launch, including retiring legacy platforms, strengthening responsible AI governance, streaming data architecture, and opening access to global innovation via our Silicon Valley hub. We recently proposed changes that would see the JV tap into Accenture's existing resources and expertise to deliver on our data and AI roadmap more quickly. That means some roles would not be required. While decisions like this are never easy, over time we expect it will deliver benefits to our customers and our business faster. Third is our investment in upskilling our people. We continue to put AI tools into the hands of our people to help them learn and adapt. And over the half, more than 75% of our team who, with access to those tools, use them weekly or more often. We also continue to offer training through our Data and AI Academy. In the first six months of FY26, almost 9,000 of our people completed a course. Looking ahead, we are focused on continuing to deliver value for our customers, communities and shareholders as we build momentum behind our Connected Future 30 strategy. This includes through our core business cash flows, active portfolio and investment management and disciplined capital management. Our ambition is to be the number one choice in connectivity in Australia and to continue delivering on our purpose to build a connected future so that everyone can thrive. I'd like to thank the Telstra team for everything they have delivered in the half and the care they've shown for our customers, particularly responding to the Victorian fires and Queensland floods over the summer. I'll now hand to Michael to take you through the results in detail.

Thanks, Vicki. And as Vicki said, we've had another strong half with continued growth across all earnings and cash metrics, including our new guidance measures. This is in line with our goal to deliver resilient, predictable and consistent growth under our Connected Future 30 strategy. While total income across the group increased just 0.2% and a half, we've reduced operating expenses by 2.1% with our continued focus on efficiency. EBITDA after lease depreciation or EBITDA was up 4.9% on a reported basis and 5.5% on an underlying basis. with the difference due to a $23 million impairment of the London Hosting Centre. We've delivered a profit to Telstra shareholders of 1.1 billion, up 9%, and earnings per share of 9.9 cents, up 11%. These results reflect growth in key products, especially mobile, ongoing strong cost management, and reduced shares on issue from buybacks. Cash earnings were higher than reported earnings as depreciation and amortisation is higher than business as usual or BAU CapEx. We expect this trend to continue and continued growth in DNA. In addition, cash EPS of 14 cents per share was up 20%. A higher growth rate than reported EPS as BAU CapEx was lowered this half. As Vicky said, with stronger cash earnings, the board increased the interim dividend to 10.5 cents per share, up 10.5% on a cash basis. This represents 75% of cash EPS. With our tight franking balance and ongoing gap between cash and accounting earnings, partial franking in this period best supports a growing and sustainable dividend. We've also lifted our current buyback from up to 1 billion to up to 1.25 billion. 637 million was bought back in the first half, or 1.1% of shares, at an average price of $4.90, bringing us to a total of 2.6% of shares retired in the calendar year 2025. Now, given this is the first half we are reporting on cash EBIT and cash earnings, let me provide a little more detail. As a reminder, cash EBIT is a view of earnings after key cost buckets including BAU CapEx, lease and spectrum amortisation. Cash earnings is a further view after interest, tax and non-controlling interests. Cash EBIT growth of 14% to $2.5 billion follows growth in our core operations coupled with strong cost management and lower BAU CapEx. BAU CapEx of 1.5 billion was down 5%, largely due to timing. We expect a higher spend on digital infrastructure, including in our international business, in the second half. Despite a lower average borrowing rate, finance costs increased modestly. Tax was higher, in line with higher earnings, with an effective tax rate of 28.4%. With that, cash earnings grew 17% to 1.6 billion. Turning to slide 14 on product profitability, we delivered EBITDA growth across mobile, fixed CNSB, infra co-fixed, Amplitel and other. Other EBITDA comprises costs not allocated to product. It improved with Fable foreign exchange movements, adjustments due to bond rate changes and the absence of equity losses following the divestment of our Foxtel stake last year. was flat with continued growth in revenue offset by higher costs supporting new contracts and ongoing transformation. Other EBITDA would generally be around a 70 million loss per half, although this varies based on the nature of the items included. Turning to our key products, starting with mobile, which continues to demonstrate strong performance. Mobile service revenue grew 5.6% with growth across all product groups, including postpaid, prepaid, and wholesale handheld, mobile broadband, and IoT. We delivered sustained average revenue per user, or ARPU growth, across all categories, brands, and segments with disciplined commercial execution. Postpaid handheld ARPU grew 4.8%, prepaid handheld ARPU grew 14.7%, although significantly lower on a unique user basis. And growth is due to the flow through of October 2024 price changes. And wholesale ARPU grew 7%. We achieved this ARPU growth while also growing postpaid, prepaid and wholesale customers. our handheld mobile user base grew by 135,000 in the half. Mobile EBITDA grew 4% to 2.7 billion, with service revenue growth partly offset by higher costs, including higher than usual customer remediation and compensation, sales costs largely related to satellite, increased redundancy, and a higher allocation of shared costs as mobile becomes a bigger part of our business. We expect sequential mobile service revenue growth to be muted given the timing of past price changes and lower IoT revenue following the divestment of MT data. Turning to fixed consumer and small business where we continue to grow earnings by focusing on a portfolio of products and technologies and strong cost management. In the half, we grew NBN unit margin through price rises and plan mix, which offset SIA losses, and we continued to grow our 5G fixed wireless product. We continued to invest in our offering in the half. We launched our internet-only plans and introduced the Telstra Smart Modem 4. However, SIA losses remain a challenge and a focus for our channel and marketing teams. In fixed enterprise, we've continued efforts to reset the business and focus on connectivity and strategic growth areas. Starting with data and connectivity, or DAC, where income fell 9%. During the half, progress on product refresh and upselling to higher bandwidths was not enough to offset the impact of service rationalisation and in-period customer credits. We delivered cost and capex reductions. However, DACA EBITDA declined to $25 million as cost reduction was insufficient to offset the revenue decline. Turning to Network Applications and Services, or NAS, revenue declined 4% following deliberate decisions to focus on areas aligned to our strategy and declines in calling products. With strong cost management, EBITDA increased to $62.5 million Our focus on portfolio management is ongoing. The sale of Alliance Automation and MT Data are completed, and the sale of 75% of Versant Group, announced last August, is expected to close this half. These businesses contributed $235 million in revenue in the first half of FY26. Turning now to international on slide 18. While reported EBITDA fell 0.5%, we achieved modest growth, excluding significant one-offs. Starting with wholesale and enterprise, while reported EBITDA of $232 million grew 20%, this included $45 million of one-off benefits, including deferred revenue recognition, other balance sheet releases, and an equity accounted associate gain. Excluding these and one-offs in the prior period, as well as FX impacts, EBITDA grew around 1%. This growth was delivered through strong cost management, following a strategic refocus of the business on DAC. This more than offset DAC margin pressure from higher offset mix, ongoing declines in legacy voice, a business we expect to complete the sale of this month, Looking forward, wholesale and enterprise EBITDA is expected to decrease significantly in the second half sequentially, with the one-off items not expected to repeat, declines in NAS and voice, and partially offset by ongoing cost discipline. Over the past few years, we've focused on maximising utilisation in our subsea cable assets. We have been disciplined in our investments in new capacity. However, this has limited opportunities for new sales and growth. We now see promising investment opportunities in the second half of FY26 within our BAU CAPEX guidance. Digicel Pacific reported EBITDA declined 22% to $139 million as the prior year benefited from the release of the remaining earn-out provisions. Excluding this and in constant currency, EBITDA grew 1.7% with ongoing cost reduction offsetting a challenging operating environment. Turning to infrastructure on slide 19, InfraCo fixed income was broadly flat at $1.4 billion with growth from NBN CPI indexation and ground stations. This was offset by lower commercial and recoverable works, reported legacy asset sales and internal revenue based on efficiencies and lower power charges. Infracote fixed EBITDA grew 3.4% to $905 million, including a higher contribution from NBN, copper recovery, commercial works and cost efficiency, partially offset by the reduced internal income. Amplatel continued to benefit from strong demand for towers and cost efficiencies. EBITDA grew 6.6% to $162 million, despite the mock and impacts. regarding strategic investments, including the EORA network, which is our new name for our inner-city fibre. We continue to expect spend of 1.6 billion above BAU capex across the project. Now, while we expect the vast majority of this spend to occur by the end of FY27, we now expect a small amount of spend and some routes to complete in FY28. We continue to be disciplined in the build of this 30-year asset, including prioritising routes in line with customer demand and returns. We expect a mid-teens IRR with strong revenue growth, especially from FY28, in line with demand as routes come online. Strong cost management is a key highlight of this result. Our proactive cost management and the benefits from technology adoption is helping us be more efficient respond to structural challenges in some products, as well as the impact of inflation, and allow for reinvestment. Lower sales costs were a function of lower fixed CNSB, international and NAS costs. Fixed costs were $76 million lower. Together with lower BAU capex, cash EBIT costs reduced, delivering strong operating leverage of over three percentage points. We've maintained our strong capital position with liquidity supported by strong operating cash flows. Net debt remained stable at 1.9 times despite our buybacks as higher debt was offset by EBITDA growth. We've also reduced our average cost of debt to 4.8% and extended our maturity profile. Our balance sheet is strong and we remain committed to an A-band credit rating. This has enabled us to lift our current buyback. We've also improved our return on invested capital. Turning to FY26 guidance on slide 22. Today, we are tightening our underlying EBITDA guidance to between 8.2 and 8.4 billion, with the midpoint unchanged. Our guidance on all other measures is reconfirmed. In terms of EBITDA, there are a number of one-offs that have benefited the first half, including in international and other EBITDA. The second half will also reflect the loss of earnings from businesses we have divested. Offsetting these items in the second half, we expect ongoing productivity, including carry-in from prior years, as well as InfraCo asset sales and net product growth. As previously noted, we also expect higher BAU CapEx in the second half. These results demonstrate our value creation under our Connected Future 30 strategy. growth in core business cash flow, 17% growth in cash earnings supported by strong operating leverage, portfolio and investment management, where we continue to execute in line with our strategy to enhance returns, and disciplined capital management, including a lift in dividend and buyback. Finally, I would also like to thank the Telstra team for all of their ongoing efforts in delivering value, especially for our customers, the communities in which we operate, and our shareholders. And on our hand to Nathan for Q&A. Thank you.