November 30, 2017 / 10:04 PM / a year ago

UPDATE 1-Telstra cuts FY18 earnings forecast on nbn rollout impact; reaffirms dividend

(Adds background, dividend guidance affirmation, additional details)

Dec 1 (Reuters) - Australia’s biggest telecom company, Telstra Corp Ltd, cut its earnings guidance for the current financial year by A$600 million ($454 million) on Friday, as delays in the rollout of a new government-owned broadband network hurt income.

The company cut its forecast for 2018 full-year earnings before interest, tax, depreciation and amortisation to A$10.1 billion-A$10.6 billion from a prediction in August for earnings between A$10.7 billion and A$11.2 billion. The average forecast from analysts polled by Thomson Reuters I/B/E/S was for full-year EBITDA of about A$10.9 billion.

Despite the cut in its earnings forecast, Telstra reaffirmed its guidance for a financial year 2018 dividend of 22 Australian cents per share.

A pause in the rollout of the network, which was announced by the state-owned NBN Co. on Monday, will delay payments from the company to rent Telstra’s ducts and other infrastructure in the financial year, Telstra said. It cut its forecast income range from NBN Co. by about A$600 million.

However, the delay in rollout will be slightly positive in financial terms over the full rollout.

Australia’s government-owned National Broadband Network is usurping Telstra’s status as the country’s monopoly telecoms wholesaler, and will replace Telstra’s copper lines with fibre-optic by about 2021.

But as the rollout has gathered pace it has come under fire for poor service and slow speeds, while Telstra and its rivals have found re-selling connections less profitable than expected.

Telstra already expects the new network to hit its earnings by about A$3 billion a year from its scheduled completion in 2021, as it loses its wholesale income stream.

In addition, facing falling revenue from its fixed line and mobile telephone businesses, Telstra in August announced it would cut its 2018 dividend by nearly a third as it buys time to seek growth elsewhere - sending shares to a five-year low, where they have traded since. ($1 = 1.3221 Australian dollars) (Reporting by Tom Westbrook and Aditya Soni in Bengaluru; Editing by Matthew Mpoke Bigg and Hugh Lawson)

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