Telstra’s FY26 EBITDAaL Grows 4% with Dividend Up 10.5%

Financial Performance and Capital Management

Telstra Group Limited (ASX:TLS) delivered a solid FY26 financial performance, with underlying EBITDA after leases (EBITDAaL) growing 4% to $8.3 billion and cash earnings per share surging 14% to 25.5 cents. Despite a slight 0.9% dip in total income to $23.4 billion, the company reported net profit after tax up 2.7% to $2.4 billion and earnings per share rising 5.3% to 19.9 cents.

The Board declared a final dividend of 10.5 cents per share, 90.5% franked, bringing the full-year dividend to 21 cents per share, a 10.5% increase on a cash basis. This payout represents 106% of reported EPS and 82% of cash EPS, consistent with Telstra’s Capital Management Framework focused on sustainable and growing dividends.

Capital discipline was evident as Telstra completed a $1.25 billion on-market share buy-back in June 2026, cancelling 2.2% of shares on issue. The company announced a further buy-back of up to $1 billion for FY27, signaling confidence in its earnings growth and balance sheet strength. These buy-backs, alongside increased capital expenditure and strategic investments, aim to optimise Telstra’s capital structure by shifting towards more debt and less equity, lowering the cost of capital and supporting shareholder returns.

Operational Highlights and Strategic Progress

Telstra’s Connected Future 30 strategy underpinned FY26’s progress, focusing on three layers: Customer Engagement, Network as a Product, and Digital Infrastructure. The company invested over $9.5 billion in its mobile network over the past five years, including $3.8 billion in regional areas, with FY26 alone seeing nearly 1,200 mobile sites upgraded with 5G Advanced and 150 new sites built.

Network resilience improved with more than 1,800 sites fitted with backup power, mitigating the impact of approximately 165,000 mains power interruptions annually, with 97% causing no service disruption in FY26. Telstra’s Network Experience Index rose 1.6 points, reflecting enhanced reliability and performance.

Digital infrastructure momentum accelerated with over 8,500 km of fibre deployed on the Aura Network and six routes ready for service. The strategic investment for Aura and Viasat projects increased to around $1.8 billion through FY28, with a sales pipeline growing significantly. Long-term contracts were secured with major cloud and AI providers including Google, AWS, Firmus, and Microsoft, the latter acting as a foundational partner.

Network Outage and Remediation

On 8 July 2026, Telstra suffered a significant network outage affecting mobile calls, data services, and some emergency Triple Zero calls. Preliminary investigations attribute the outage to an undocumented network design change combined with an unpatched software update. Telstra has taken accountability, initiated remediation actions, and commissioned an external expert review, with findings to be made public.

The outage prompted regulatory scrutiny and customer claims assessments, with financial implications still uncertain. The Board has exercised discretion in executive remuneration outcomes, reducing the CEO’s short-term incentive multiplier by 20 percentage points and other senior executives by 10 points, reflecting accountability for the outage’s impact.

Sustainability Achievements and Climate Strategy

Telstra reported significant progress on its climate commitments, reducing absolute scope 1 and 2 greenhouse gas emissions by 48% and scope 3 emissions by 49% from a FY19 baseline, excluding Digicel Pacific. The company achieved its target to enable renewable energy generation equivalent to 121% of its consumption by December 2025, supporting Australia’s energy transition.

Climate-related risks such as service disruption from acute climate events and the rapid, disorderly transition of the electricity grid are actively managed through investments in network resilience, backup power, and energy efficiency. Telstra’s climate transition plan focuses on reducing its own emissions, enabling grid decarbonisation, and supporting supplier emissions reductions.

Outlook and FY27 Guidance

Looking ahead, Telstra expects continued underlying EBITDAaL growth to between $8.5 billion and $8.8 billion in FY27, with business-as-usual capital expenditure projected between $3.35 billion and $3.65 billion. Cash EBIT guidance ranges from $4.75 billion to $4.95 billion, with strategic investments forecast at $200 million to $300 million.

FY27 priorities include accelerating mobile transformation with increased 5G Standalone rollout, evolving Network as a Product offerings, expanding AI-driven business transformation, growing digital infrastructure revenue, and maintaining disciplined cost and capital management. The company aims to deliver mid-single digit compound annual growth in cash earnings to FY30 and improve underlying return on invested capital to 10%.

Balance Sheet and Debt Position

Telstra’s net debt increased 5.2% to $17.3 billion, reflecting the completed buy-back and higher borrowings, while maintaining a comfortable debt servicing ratio of 2.0 times EBITDA. The average cost of debt decreased to 4.8%, supported by diversified funding sources including Euro and Swiss bonds, bank loans, and commercial paper. The company maintains A- and A2 credit ratings from S&P and Moody’s respectively.

What to Watch

Investors should monitor the outcomes of the network outage investigation and any regulatory actions or financial impacts that may arise. Execution of the Connected Future 30 strategy, particularly the Aura Network build and AI integration, will be key to sustaining growth and competitive advantage. Progress on sustainability targets and the evolving energy market landscape will also influence Telstra’s operational costs and risk profile. The announced $1 billion buy-back program for FY27, alongside ongoing capital investments, underscores management’s focus on shareholder returns amid strategic transformation.