Telstra Group Limited (formerly Telstra Corporation Limited)

Sources: FY22 (Market Index, 11 August 2022, citing the Telstra result); FY23 (Telstra release, 17 August 2023); FY24 (FY24 Annual Report, with FY24 EBITDA as restated in FY25 and FY26 materials); FY25 and FY26 (FY26 results presentation and Annual Report).

Income statement

Notes:

• Gross profit is not reported; Telstra presents a nature-of-expense income statement.

• Total income (23,245) is verified.

• FY22 reported EBITDA is derived from FY23 growth of +8.4%; a secondary source cites A$7,256m.

• FY24 EBITDA of 7,528 is the figure presented in the FY24 Annual Report summary and as the FY25 comparative. Some secondary sources cite A$7.2 billion, reflecting a presentation basis before lease reclassification. The discrepancy is noted.

• FY23 and FY24 EBIT and PBT are derived as EBITDA minus D&A, and EBIT minus net finance costs respectively.

• The FY22 dividend of 16.5 cents includes a special component (8.0 cents interim plus 8.5 cents final, as reported at the time).

• The FY26 dividend is 90.5% franked (19.0 cents franked, 2.0 cents unfranked) — the first year since FY23 that the dividend was not fully franked.

Underlying performance (guidance basis)

FY22 underlying EBITDA is derived from FY23 underlying growth of +9.6% and corroborated by a secondary source citing A$7,256m. FY23 underlying EBITDA was originally reported as about A$8.0 billion and is shown as A$7,950m in FY26 comparatives.

Margins and growth (derived, on total income)

Total income CAGR FY22–FY26: +1.5% (derived: 22,045 → 23,405). Underlying EBITDA CAGR FY22–FY26: +5.3% (derived: 7,254 → 8,918). Reported EPS CAGR FY22–FY26: +8.4% (14.4 → 19.9 cents).

Commentary. The five-year pattern is one of near-flat revenue with compounding margin expansion. FY22 total income fell 4.7% as the nbn migration completed and one-off nbn receipts rolled off. FY23 income growth (+5.4%) was flattered by the first full-year consolidation of Digicel Pacific and mobile price rises. FY24 reported profit fell 12.8% on A$518 million of enterprise write-downs, restructuring and M&A adjustments tied to the May 2024 reset, although underlying EBITDA grew 3.7%. FY25 reported EBITDA rose 14.3% as those one-offs did not recur.

FY26 is the cleanest illustration of the CF30 model. Underlying income fell 0.8% because of divestments, product rationalisation and a weaker PNG kina. Yet underlying operating expenses fell 3.0% (−A$454m), delivering +2.0pp operating leverage, +4.0% underlying EBITDAaL, +8.0% Cash EBIT and +13.8% Cash EPS.

The widening gap between Cash EPS (25.5 cents) and reported EPS (19.9 cents) is analytically important. D&A excluding leases and spectrum (A$3,945m) now exceeds BAU capex plus leases plus spectrum amortisation by A$580m (5.1 cents per share). Management expects D&A to keep rising as the Aura and 5G Advanced assets are commissioned, which will continue to suppress statutory EPS relative to cash earnings.

Balance sheet

Notes:

• FY25 total assets, liabilities and cash are from an aggregator (Kalkine) and should be reconciled to the FY25 Annual Report.

• Telstra's debt-servicing ratio in its own materials is 1.9x on underlying EBITDA, against a comfort zone of 1.75–2.25x; slide 21 shows 2.0x at FY26.

• The FY26 net debt increase of A$0.9 billion includes a A$0.3 billion derivative valuation change and the A$1.25 billion buyback.

Cash flow (Source: FY26 results presentation, slide 36)

Notes:

• FY23 FCFaL of about A$2.8 billion is "guidance basis" (The Motley Fool, citing the Telstra result).

• FY26 shareholder distributions (A$3.51 billion: A$2.26 billion of dividends plus A$1.25 billion of buybacks) exceeded cashflow before dividends, buybacks and net borrowings (A$2.34 billion). The A$1.17 billion shortfall was funded by net borrowings, consistent with management's stated intent to shift the capital structure "toward more debt and less equity".

Ratios

Notes:

• FY24 reported ROIC of 16.8% appears in Telstra's FY26 ROIC slide history and likely reflects a one-off or definitional item; it is shown as disclosed. Underlying ROIC is the CF30 metric (target 10% by FY30).

• ROE is approximated as NPAT divided by FY25 aggregator equity (A$16.3 billion). The FY26 figure uses the same equity base and is indicative only.

• Not computed for lack of verified balance-sheet detail: ROA, current ratio, debt/equity and cash conversion cycle. Telstra operates with negative working capital characteristics typical of prepaid and subscription telcos (customer prepayments and deferred revenue).

Management guidance (FY27)

Outage remediation is not expected to affect FY27 guidance (2 September 2026). Mobile ARPU is expected to benefit from the May 2026 price changes. D&A is expected to keep rising. The Hong Kong property gain (about US$60m) and Versent proceeds will be excluded from underlying results.

Consensus expectations

Broker forecasts point to mid-single-digit EBITDA growth and DPS of about 22 cents in FY27, consistent with the CF30 ambition of mid-single-digit cash earnings growth.

Bull case

1. Infrastructure re-rating. InfraCo Fixed and Amplitel (about A$2.3bn combined EBITDA, 66% margins, CPI-linked) plus Aura (mid-teens IRR, hyperscaler-contracted) justify a sum-of-the-parts above the current about 8x EV/EBITDA, especially as AI data centre build-out accelerates the pipeline.

2. Cash earnings compounding. Cash EPS grew 13.8% in FY26 on flat revenue. With BAU capex held roughly flat, opex falling about 3% a year and mobile ARPU rising, cash earnings can exceed the mid-single-digit CF30 target and fund both rising dividends and buybacks.

3. Mobile pricing power is intact. Despite the outage, postpaid churn improved to 12.8%, NPS hit records and ARPU rose across every brand. The oligopoly structure and Telstra's coverage lead support continued real price increases.

Bear case

1. Outage-driven regulatory and capex reset. The TAP findings (insufficient engineering capability, expertise and investment) invite tougher ACMA resilience obligations, penalties and a structurally higher capex requirement. That would erode Cash EBIT growth just as spectrum renewals (about A$2.8bn over FY28–FY33) arrive.

2. Leverage creeping up for buybacks. FY26 distributions of A$3.5bn exceeded pre-distribution cash flow of A$2.3bn. Net debt to EBITDA rose to 2.0x, the dividend payout on EPS is 106%, and franking has already slipped to 90.5%. The capital return model is therefore increasingly debt-funded.

3. Structural revenue decline. Total income has fallen in two of the last five years. Fixed Enterprise is shrinking about 8% a year, nbn resale is losing about 4% of SIOs a year, and international income is down 11%. If mobile price rises meet cost-of-living resistance, the "price and cost" levers could run out.

Key catalysts and monitorables (next 12 months)

• ACMA investigation outcome and any penalty or enforceable undertaking (timing uncertain).

• Senate inquiry report recommendations and any new resilience or Triple Zero regulations.

• 1H27 results (February 2027): first reporting under the Telstra Digital Infrastructure structure; evidence of a mobile ARPU uplift from the May 2026 pricing; any churn impact from the outage.

• Completion of the Versent sale (Infosys) and the Hong Kong property sale (1H27).

• Aura contract announcements and progress on the remaining routes; any further budget revision.

• Progress on the up-to-A$1bn buyback; direction of net debt to EBITDA within the 1.75–2.25x comfort zone; franking levels.

• 5G Standalone acceleration and network API commercialisation metrics.

• Further ACMA spectrum pricing developments.

• Competitor moves, including the regional network-sharing roll-out by TPG and Optus.

Analyst verdict

Telstra exits FY26 as a better-run, simpler and more cash-generative company than at any point since the nbn upheaval. It is also more exposed than ever to the one attribute on which its premium rests: network reliability.

The financial record under Vicki Brady is strong:

• Underlying EBITDA compounded at about 5% a year from FY22 to FY26 on revenue growth of barely 1.5%.

• Cash EPS rose 14% in FY26.

• Underlying ROIC reached 9.0%, within sight of the 10% FY30 target.

• Two consecutive years of buybacks shrank the share count by about 3.6% while capex rose.

The portfolio has also been sharpened. Non-core IT services are being sold or exited (Versent, Alliance Automation, MTData, wholesale voice, London hosting), while capital is redirected toward assets with structural AI-era demand, namely Aura, subsea capacity and ground stations.

The July 2026 outage, however, is not a one-off public-relations problem. The external review's conclusion that a core timing capability was neither prioritised nor adequately resourced points to the cost-out programme having cut into engineering depth. That raises a fair question about whether some FY24–FY26 margin gains were partly "borrowed" from resilience. Management's insistence that remediation will not affect FY27 guidance should be tested against the ACMA's findings and any new obligations.

Valuation looks balanced. At about 24x reported EPS, about 19x Cash EPS, about 8x EV/EBITDA and a 4.3% partially franked yield, the market already credits mobile durability and infrastructure optionality. It is not, however, paying for an infrastructure separation or a sharp Aura upside.

Conclusion: Telstra remains a high-quality defensive compounder with modest real growth. In our view the risk/reward is neutral to mildly positive over 12 months, conditional on three things: no punitive ACMA outcome, evidence that the May 2026 pricing holds without a churn spike, and debt-funded distributions remaining within the A-band envelope. Investors should treat 1H27 (February 2027) as the key checkpoint.