SYDNEY (Reuters) - Telstra Corp Ltd <TLS.AX> said on Thursday it would slash its dividend by 30 percent this financial year, the first cut since Australia's biggest telecoms firm listed in 1997, as it buys time to seek growth away from declining traditional streams.
The stock tumbled 12 percent to to A$3.91 in the minutes after the market opened, its biggest ever daily drop and hitting a five-year low as investors bailed on an asset widely held for its high yield.
"Volumes are enormous - there could not be a more important piece of information, particularly for retail investors, than the amount of the dividend," said Michael McCarthy, chief market strategist at stockbroker CMC Markets.
The bad news for shareholders came as Telstra unveiled a 1.1 percent rise in full-year underlying profit, with gains from its wholesale division offsetting falling revenues from fixed-line and mobile telephone businesses.
The company said headwinds included the negative impact of a new state-owned National Broadband Network, which will replace Telstra's copper lines by about 2020.
The new network would hit earnings by about A$3 billion a year from its scheduled completion in 2021, the company said on Thursday, the top end of a previously given range of A$2 billion to A$3 billion.
"Our industry is in transition, we're in transition ... we need to set our company up for the long run," Chief Financial Officer Warwick Bray told Reuters by phone, explaining the reduced dividend policy.
Telstra held its final dividend for the year ended June 30 2017 at 15.5 Australian cents-per-share, but its planned 30 percent cut in the 2018 financial year was much deeper than analyst forecasts.
Profit after tax from continuing operations in 2016-17 was A$3.87 billion ($3 billion). The figure strips out the effect of a one-off gain from an asset sale in the prior year.
Net profit, also A$3.87 billion, dropped 33.8 percent to its lowest in four years following the one-off bump from asset sales the previous period. That was in-line with an average forecast of A$3.9 billion, according to 10 analysts polled by Thomson Reuters I/B/E/S.
Revenue fell 2.7 percent to A$26 billion.
It expected to earn about A$1 billion a year from renting ducts and other infrastructure to the new network, and was considering on-selling about 40 percent of that income to investors.
Such a transaction could raise as much as A$5.5 billion.
(Reporting by Christina Martin in Bengaluru; Editing by Tom Westbrook and Stephen Coates)
