Telstra FY26 Underlying EBITDAaL Rises to $8.3 Billion with Increased CapEx

Financial Performance and Capital Management

Telstra Group Limited (ASX:TLS) reported a robust full-year performance for FY26, with underlying EBITDA after leases (EBITDAaL) rising 4% to $8.3 billion and cash earnings per share (EPS) surging 14% to 25.5 cents. This growth was underpinned by disciplined cost control, portfolio rationalisation, and strategic capital allocation. The Board declared a final dividend of 10.5 cents per share, bringing the full-year dividend to 21 cents, a 10.5% increase on a cash basis.

The company completed a $1.25 billion on-market share buyback during the year and announced a further $1 billion buyback, signalling confidence in its financial strength and outlook. These buybacks, alongside increased capital expenditure, aim to optimise Telstra’s capital structure by shifting towards more debt and less equity, enhancing returns per share.

Network Investments and Digital Infrastructure Expansion

Telstra’s capital expenditure rose by approximately $800 million since FY21, focusing heavily on network resilience, 5G rollout; including the acceleration of 5G Standalone; and digital infrastructure projects such as the Aura Network. Over the past five years, the company invested more than $9.5 billion in its mobile network, including $3.8 billion in regional Australia.

The Aura Network, a strategic fibre build spanning over 8,500 kilometres with six routes ready for service, is now more than halfway complete. Inflationary pressures and project-specific challenges have increased the expected total investment to around $1.8 billion through FY28, up from the prior estimate of $1.6 billion. Despite this, Telstra remains confident in the project’s mid-teens internal rate of return (IRR) and approximately nine-year cash payback period, bolstered by a significantly expanded sales pipeline and customer signings involving major tech players such as Google, AWS, and Microsoft.

Addressing the July Network Outage and Regulatory Scrutiny

Telstra experienced a major network outage in July 2026, which highlighted the critical reliance Australians have on connectivity. The company has taken full accountability, with CEO Vicki Brady and the senior executive team receiving a 20 percentage point reduction in their short-term incentives. An external expert investigation is ongoing, and the Australian Communications and Media Authority (ACMA) has commenced a regulatory inquiry into the incident.

Initial findings indicate the outage stemmed from an undocumented design change and a missed software update rather than capital expenditure issues. Telstra has processed just under $1 million in customer credits related to the outage and is cooperating fully with ACMA’s investigation, which remains in its early stages.

Navigating Market Dynamics and Technology Evolution

Telstra’s mobile business showed resilience with mobile service revenue up 4.8% and mobile EBITDA growing 3%. The company continues to manage a portfolio of brands and products, including prepaid, postpaid, and wholesale, to address diverse customer segments. Average revenue per user (ARPU) growth was supported by recent price increases and product innovation, including satellite messaging services that extend coverage beyond traditional mobile footprints.

Looking ahead, Telstra is accelerating its mobile transformation with increased network density and 5G Standalone rollout to support emerging AI applications requiring low latency and high capacity. The company also emphasised its disciplined approach to AI adoption, leveraging its joint venture with Accenture to enhance internal capabilities and maintain cost efficiency despite rapidly growing AI usage.

Strategic Outlook and FY27 Guidance

For FY27, Telstra guides underlying EBITDAaL growth to between $8.5 billion and $8.8 billion, with business-as-usual (BAU) capital expenditure expected to rise modestly to $3.35-$3.65 billion, reflecting increased network investment. Strategic investment is forecast at $0.2-$0.3 billion. The company plans to maintain its focus on positive operating leverage, portfolio simplification, and shareholder returns, while continuing to invest in network resilience and digital infrastructure.

Telstra’s leadership reiterated commitment to its Connected Future 30 strategy, aiming for mid-single-digit cash earnings growth and leveraging its infrastructure assets to position Australia as a digital and AI innovation hub. The company is also monitoring regulatory developments, including the ACCC’s mobile services inquiry, which will assess emerging technologies such as satellite direct-to-device services and their impact on competition and investment incentives.