Telstra’s (ASX: TLS) fiscal 2025 underlying earnings before interest, taxes, depreciation and amortisation (“EBITDA”) grew by 5% to $8.621 billion and underlying net profit increased 3% to $2.195 billion. A final dividend per share of $0.095 was declared, bringing the total for the year to $0.19 fully franked, up 6%.

Why it matters: Investors’ consternation with the mobile result is curious. Granted, the market is becoming more subdued. But the 1% fall in postpaid subscribers in fiscal 2025 was also due to one-off events, while the 3% fall in prepaid subscribers reflected a conscious focus on improving yield.

  • Indeed, higher average revenue per user for postpaid (3%) and prepaid (8%) drove a 5% lift in mobile EBITDA to $5.261 billion, the fifth straight year of growth. Having advocated for greater focus on return on capital for some time, we applaud Telstra’s continuing pricing discipline.
  • Resurrection of the fixed-line units is continuing, with their aggregate fiscal 2025 EBITDA up 41% to $684 million. Shedding peripheral offerings and resetting the cost base has already improved EBITDA margins to 8.5% in fiscal 2025, from 5.9% a year ago, and further improvements are likely.

The bottom line: We raise our Telstra fair value estimate by 6% to $5. The fiscal 2025 result was in line with our expectations, and our fiscal 2026 forecasts are largely unchanged and in line with management’s guidance. However, our EBITDA projections are lifted by around 4%.

  • The upgrade reflects our greater confidence in the continuing margin-led turnaround in the fixed-line businesses, and likely maintenance of mobile earnings even though they have enjoyed a compounded annual growth rate (“CAGR”) of 11% since fiscal 2020. There is also cost-out potential that management may be downplaying.
  • Shares in the narrow-moat group are trading in line with our intrinsic assessment. While the negative market reaction to the result may be due to some nitpicking over subdued mobile subscribers, the fundamentals are intact, so much so that another $1 billion buyback has been announced.

Telstra reports an in-line fiscal 2025 result

Telstra’s performance during and since the depths of covid-19 shows the resilience of its earnings and the strength of its balance sheet, especially given the negative impact on high-margin roaming revenue was material during the pandemic. The AUD 2.7 billion cost-out program under T22 was delivered, and an additional AUD 428 million of costs was eliminated under the T25 plan.

In May 2025, Telstra unveiled a new five-year strategic plan. It is targeting mid-single-digit compound annual growth in cash earnings to fiscal 2030, while aiming to generate “a sustainable and growing dividend.”

Telstra is the largest telecommunications services provider in Australia. It has dominant market share in each service category and customer segment, and enjoys cost advantages that underpin its narrow moat rating. While competition is robust, Telstra’s mobile market shares are likely to prove resilient.

Telstra’s infrastructure provides the most comprehensive coverage for fixed-line, mobile, and broadband in Australia, which drives reliable cash flow. Telstra is not the cheapest provider of telecommunications services, but is the lowest-cost provider, resulting in EBITDA margins of over 30%.

The NBN has reshaped Telstra, and a slimmed-down operational base is now focused on mobiles and efficiency improvements. Competitive advantage in coverage and speed of the Telstra mobile network attracts customers demanding reliable mobile connectivity. The network has the capacity to handle escalating demand for data. NAS delivers value-added services on Telstra’s high-speed networks, including cloud computing, high-definition video conferencing, and managed data networks for private and public sector entities.

Offsetting its success in mobile, fixed-voice products are experiencing both structural decline and increased competition. In line with global trends, revenue from traditional voice services provided by the public switched telephone network, or PSTN, or copper network, is in decline. This is the reason why Telstra’s continuing commitment to cost reductions and efficiency gains is important.

Telstra bulls say

  • Telstra has market-leading shares across all vital telecommunications segments and is likely to maintain these positions in the future.
  • While the telecommunications space is incredibly competitive, Telstra has a significant competitive advantage via its extensive mobile and wireless networks.
  • Decommissioning of the copper network lowers capital intensiveness of the business. Telstra can redirect capital to the higher-growth mobile segment.

Telstra bears say

  • Regulatory risks are real. Wholesale NBN prices are high and could increase further, while government scrutiny on Telstra’s market power is ever-present, especially in regional and rural areas.
  • Competitive intensity is high, especially in mobile.

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Terms used in this article

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.