Telstra Group Ltd (ASX:TLS) is combining growth in mobile Earnings with further Capital returns following its FY26 result. The telecommunications group reported underlying EBITDAaL of $8.3 billion, lifted its full-year Dividend to 21 cents per share and announced a new on-market share buyback of up to $1 billion after completing its previous $1.25 billion programme.

Telstra operates across mobile, fixed broadband, enterprise telecommunications and infrastructure services in Australia and international markets. Mobile remains a central earnings contributor, while the company continues investing in network capability, digital infrastructure and operating efficiency under its Connected Future 30 strategy.

Mobile remains a key earnings contributor

Telstra reported total FY26 income of $23.4 billion, down 0.9% from the previous year. Despite the decline in overall income, underlying EBITDAaL increased 4.0% to $8.3 billion.

Net profit after tax increased 2.7% to $2.4 billion, while cash earnings rose 11.6% to $2.9 billion. Cash EBIT increased 8.0% to $4.7 billion.

Reported Earnings Per Share were 19.9 cents, while cash earnings per share reached 25.5 cents.

The difference between Telstra's modestly lower total income and higher earnings reflects changes in its Business mix and improved contribution from mobile operations.

Mobile service Revenue increased 4.8% during FY26. Handheld average revenue per user rose 3.7%, with postpaid ARPU increasing 3.8% and prepaid ARPU rising 7.2%.

Telstra also added 274,000 handheld customers during the year, taking the total to 8.919 million.

The combination of higher customer numbers and increases in average revenue per user supported mobile earnings and helped offset softer revenue trends elsewhere in the group.

Pricing and subscriber growth shape mobile performance

Mobile pricing continues to play an important role in Telstra's revenue outlook.

The company's ability to increase average revenue per user while expanding its subscriber base provides two separate drivers for mobile service revenue. However, the durability of this trend depends on customer retention, competitive pricing and Demand for higher-value plans.

Competition remains a key Factor across the Australian mobile market. Telstra operates alongside other major network providers competing across postpaid, prepaid and data services.

As mobile remains an important contributor to group earnings, changes in customer numbers, plan pricing and usage patterns are likely to remain closely linked to Telstra's FY27 operating performance.

Full-year dividend rises to 21 cents

Telstra declared a final FY26 dividend of 10.5 cents per share, matching its Interim Dividend of 10.5 cents.

This took the total FY26 dividend to 21 cents per share, compared with 19 cents in FY25 on a cash basis.

The FY26 dividend was 90.5% franked.

Dividend growth has accompanied higher cash earnings, although future payments remain subject to Telstra's financial performance, capital requirements and board decisions.

The company's capital allocation strategy also includes share repurchases, creating another mechanism for returning capital to shareholders.

Fresh $1 billion buyback follows completed programme

Telstra completed its previous $1.25 billion share buyback during FY26.

The programme resulted in shares representing approximately 2.2% of securities on issue being bought back and cancelled.

Following completion of that programme, Telstra announced a further on-market buyback of up to $1 billion.

A share buyback reduces the number of shares outstanding. If earnings remain unchanged, a smaller share base can increase earnings attributable to each remaining share.

However, Buybacks also use cash that could otherwise be retained on the balance sheet, invested in the business or used to reduce borrowings. The pace and eventual size of the new programme will therefore need to be considered alongside Telstra's Investment requirements and cash generation.

FY27 earnings guidance points to further EBITDAaL growth

Telstra has provided FY27 underlying EBITDAaL guidance of between $8.5 billion and $8.8 billion.

Compared with FY26 underlying EBITDAaL of $8.3 billion, the guidance range indicates the company expects earnings to increase during the current financial year.

Cash EBIT is expected to be between $4.75 billion and $4.95 billion.

Business-as-usual Capital Expenditure is forecast at between $3.35 billion and $3.65 billion, while strategic investment is expected to range from $200 million to $300 million.

These spending commitments highlight the balance Telstra must manage between earnings growth, network investment, dividends and capital returns.

Network investment remains part of the strategy

Telstra continues investing in its telecommunications infrastructure as network capacity, reliability and coverage remain important competitive factors.

The company's Aura network programme is now expected to involve approximately $1.8 billion of investment between FY23 and FY28, compared with the previous estimate of $1.6 billion.

Such investment is intended to support network capability and future service requirements, but it also increases the amount of capital that must be funded from Operating Cash Flow and the balance sheet.

Telstra's capital expenditure requirements therefore remain an important consideration alongside dividends and share buybacks.

Network investment must also translate into operating efficiencies, service improvements or additional revenue over time for the expenditure to contribute meaningfully to financial returns.

Debt and capital management

Telstra ended FY26 with net Debt of $17.3 billion.

Debt servicing was 1.9 times, within the company's stated comfort range of 1.75 to 2.25 times.

The Balance Sheet therefore remains an important part of Telstra's capital-management framework as the company simultaneously funds infrastructure expenditure, dividend payments and the new buyback.

Changes in borrowing costs can also influence Telstra's financial position. Australia's cash rate was increased by 25 basis points to 4.60% in September 2026, keeping financing conditions elevated for companies carrying substantial debt.

The impact on Telstra will depend on the structure and Maturity profile of its borrowings, existing hedging arrangements and future refinancing requirements.

What could influence FY27 performance?

Mobile pricing remains one of the central variables for Telstra's FY27 performance. Higher average revenue per user can support earnings, although pricing changes must be balanced against competition and customer retention.

Subscriber growth is another consideration. Telstra added 274,000 handheld customers in FY26, and continued expansion would provide an additional base for service revenue.

At the same time, fixed-line and legacy voice revenue continue to face structural pressure as customer behaviour and telecommunications technology evolve.

Enterprise operations are another area to monitor. Weaker performance in enterprise and international activities could offset some of the benefit generated by mobile growth.

Network investment also introduces execution risk. Telstra is committing substantial capital to telecommunications infrastructure, including the Aura programme, while continuing to fund dividends and share repurchases.

Key milestones ahead

Attention during FY27 is likely to centre on progress against Telstra's EBITDAaL and cash EBIT guidance, mobile subscriber trends, average revenue per user and the pace of the new $1 billion share buyback.

The company's interim result for the half year ending 31 December 2026 will provide the next detailed assessment of earnings performance and whether mobile revenue continues to offset softer areas of the business.

Progress on capital expenditure and strategic investment will also indicate how Telstra is balancing network development with cash returns.

The FY26 result shows a company relying increasingly on mobile pricing, subscriber growth and operating earnings while continuing to return capital through dividends and buybacks. FY27 performance will depend on whether those mobile trends continue while Telstra manages network investment, competition and its balance-sheet commitments.