Telstra will persist with its Asia growth strategy, despite its failed attempt to set up in the Philippines and the $2.1 billion sale of most of its stake in Chinese online car retailer Autohome.
The telecommunications giant has been searching for growth opportunities in Asia to try to boost returns in the face of a mature and competitive market in Australia.
Chief executive Andy Penn told shareholders on Monday that Asia "continues to be a really important region for us", while also announcing that the company would return more than $1.5 billion, but investors have three months until the full-year results to find out how that promise will be fulfilled.
Telstra shares jumped 2.8 per cent on Monday to $5.51.
"We've historically really had three pillars of potential opportunity there [in Asia]," Mr Penn said.
"The first, and the most important, is continuing to grow our global enterprise services business – that's the network applications services in conjunction with connectivity that we provide for multi-national companies and Australian companies."
Other opportunities include being able to capitalise on the growing use of data on networks in the region, including in the Philippines. Although Mr Penn said Telstra pulled out of talks with Philippines conglomerate San Miguel to build the country's third mobile network because the risk-reward balance wasn't right. E-health was another area where Telstra could leverage the investments it had made domestically into the Asia region, he said.
Telstra also revealed it expected an annual hole of $2 billion to $3 billion to arise in earnings before internet, tax, depreciation and amortisation once migration across to the national broadband network was complete.
"The NBN has one-off and recurring impacts," Telstra chief financial officer Warwick Bray said. "The one-off impacts only partially compensate us for the long-term recurring impacts to our business.
"Once the NBN is fully migrated, the negative impact on our EBITDA, which we're aiming to offset, is $2 billion to $3 billion per annum."
"As a retail service provider, one-off costs include transitioning customers across to the NBN."
Mr Bray said the costs of transition were several hundred dollars per connection.
The negative impact of earnings will be partially offset by work Telstra is carrying out for NBN, including the $1.6 billion deal it inked last month to help with the rollout of the hybrid fibre-coaxial network.
Last month, Telstra flagged the sale of 47.7 per cent of Autohome to China's second-largest insurer, Ping An, at $US29.55 a share, totalling $US1.6 billion ($2.1 billion), leaving the telco with a 6.5 per cent stake.
Telstra said it expected to book an accounting gain of $1.8 billion.
The company did not confirm if the $1.5 billion capital management initiative would take the form of a share buyback or special dividend, but it would be in addition to the ordinary dividend.
Mr Penn did not go into too much detail on the capital return as the company was still deciding how to best give back to its shareholders, but said it was important Telstra investors knew what was happening with the proceeds from the sale of Autohome.
"Importantly, we also maintain sufficient capacity to invest in our growth plans for the future," he said.
Analysts had been expecting some form of capital management, and, given Telstra's low franking credit balance, a special dividend seemed a lower possibility.
Many fund managers and Telstra shareholders believed the company should return capital to shareholders, if it could not find a better way of reinvesting the cash in growth opportunities, but were divided on the best way to use the funds.
Asked about speculation about Foxtel, which is a 50-50 venture between Telstra and News Corporation, and Fox Sports merging ahead of a possible stock market float and the telco selling down part of its stake, Mr Penn said the pay subscription service remained an important investment.
"There's no doubt that media is critically important for us from a strategic perspective," he said. "Think about what's driving the enormous amount of volume, traffic, over the network, particularly from the consumer point of view, it's content and media, and not just consumer by the way.
"The partnership with Foxtel is a great synergistic partnership because it enables us to provide great content solutions for our customers and that's a differentiating factor. You can assume for Telstra, it will continue to be a strategically important business for us."
