Telstra Corporation [ASX: TLS] shares dropped by over 6% yesterday, hitting a six-year low for the company.
The telco giant’s share price is currently trading at $2.98, down from $3.20 on Friday.
The sharp drop came after a market update yesterday morning, in which the company released its third quarter earnings and downgraded their expected earnings due to challenging trading conditions.
Why has Telstra’s share price dropped?
Telstra announced that they expect their earnings to be at the bottom end of the range of its full year guidance range, which is estimated between $10.1 billion to $10.6 billion.
The update highlighted that, despite growth in subscribers, the amount each customer spends with the company is falling, including both fixed broadband and mobiles.
In particular the update specified that, although gaining 60,000 post-paid mobile subscribers, the average revenue per user dropped by 3.6%.
Telstra CEO Andrew Penn said in his speech for the telecommunication conference in Boston that,
‘The National Broadband Network (nbn) in particular has driven a number of challenging dynamics for the industry that collectively point to a difficult trading period ahead.
‘In the last 12 months alone we have moved from three big players in Mobile and fixed to a situation today where we face a 4th network operator entrant in mobile, an increasing number of MVNOs and more than 170 resellers of fixed.’
What’s next for Telstra Corporation?
Telstra are expecting the challenging conditions in FY18 to continue in FY19. This includes ongoing pressure of the average revenue per user with both mobile and fixed broadband and the accelerating impact of the NBN.
Mr Penn said that the company is focused on delivering the best network experience in Australia.
‘Recognising this dynamic we need to build new skills in new areas and that is what we have been doing at Telstra. We intend to lead the next generation of telecommunications technology as we have always done in the past.’
Telstra will provide a further market update in June regarding additional strategies that it plans to implement to address the mentioned pressures.
For, Markets & Money
PS: Our analyst Vern Gowdie believes that we’re about to experience a catastrophic market crash, and that Australian stocks could fall as much as 90%. Aussie household names like Telstra, which you would expect to be solid companies, could potentially pose a threat to your wealth. If you’re interested in learning which five companies could potentially be the most vulnerable, check out Vern’s free report ‘Sell These Five “Fatal” Stocks Now’.