Telstra Group Limited (ASX:TLS) is an Australian telecommunications company providing mobile, fixed broadband, enterprise connectivity, infrastructure and international network services. Its FY26 result showed that Earnings growth does not necessarily require a larger customer base. Mobile service Revenue increased as average revenue per user improved, while productivity initiatives and Capital management supported higher cash Earnings Per Share even as the number of mobile services edged lower.

FY26 underlying EBITDAaL rises

Telstra reported underlying EBITDA after Lease amortisation, or EBITDAaL, of approximately A$8.3 billion for FY26.

This represented growth of around 4%.

Cash earnings increased to approximately A$2.9 billion, while statutory net profit after tax was approximately A$2.4 billion.

Cash earnings per share increased faster than total cash earnings, partly reflecting the reduction in the number of shares on issue following Telstra's buy-back program.

The result illustrates the company's increasing focus on cash-based earnings measures under its Connected Future 30 strategy.

Rather than relying solely on revenue growth, Telstra is targeting a combination of higher recurring service income, productivity gains and disciplined capital expenditure.

Mobile remains Telstra's main earnings engine

Mobile continued to be the largest contributor to Telstra's operating earnings.

Mobile service revenue reached approximately A$8.9 billion in FY26, representing growth of around 5%.

The increase was supported by higher average revenue per user across both postpaid and prepaid services.

Postpaid handheld ARPU increased to approximately A$45.33 per month.

Prepaid ARPU also increased, reaching approximately A$37.50.

Higher ARPU means Telstra generated more service revenue from each customer on average even though the overall number of mobile services did not materially increase.

Mobile customer numbers edge lower

Mobile services in operation declined modestly during FY26.

The movement was small relative to Telstra's total mobile customer base, but it highlights the balance the company must manage between pricing and customer retention.

Telstra implemented mobile price changes during 2026.

Higher prices can lift revenue per customer, but they can also encourage some users to move to cheaper plans, lower-cost brands or competing providers.

This means the relationship between ARPU and subscriber numbers will remain important in FY27.

Revenue can continue to increase with a broadly stable customer base if pricing and product mix improve, but persistent customer losses would eventually place pressure on that strategy.

Pricing drives service revenue growth

The FY26 result showed how pricing can support growth in a mature telecommunications market.

Australia already has high mobile penetration, limiting the opportunity for major industry-wide subscriber growth.

Telstra therefore increasingly relies on higher-value plans, additional services and pricing changes to lift mobile revenue.

Its network coverage and service proposition support this strategy, but customers remain sensitive to household costs and competing offers.

The sustainability of future mobile revenue growth will therefore depend on Telstra maintaining a balance between pricing, customer experience and retention.

Productivity remains another earnings lever

Cost control also contributed to Telstra's FY26 performance.

The company has continued implementing productivity initiatives across its operations while simplifying products, technology systems and internal processes.

Telecommunications networks require substantial ongoing spending, so reducing operating complexity can have a material impact on earnings.

Productivity measures are particularly important when customer numbers are relatively mature.

They allow operating earnings to improve without requiring equivalent revenue growth.

Under Connected Future 30, Telstra is continuing to focus on simplifying its cost base while directing Investment toward network infrastructure and growth opportunities.

Cash earnings per share grow faster than profit

Cash earnings per share increased to approximately 25.5 cents during FY26.

That growth was faster than the increase in overall earnings.

One reason was Telstra's share buy-back program.

When shares are repurchased and cancelled, the same level of earnings is spread across fewer securities.

This mechanically increases earnings per share, provided other factors remain unchanged.

Buy-backs can therefore complement operating earnings growth, although they require cash and need to be considered alongside dividends, Debt and investment requirements.

A$1.25 billion buy-back completed

Telstra completed an A$1.25 billion on-market share buy-back during FY26.

The program reduced the number of shares on issue by approximately 2.2%.

Following completion of that program, Telstra announced another on-market buy-back of up to A$1 billion.

The decision reflects the company's capital-management framework and balance-sheet position.

Repurchases reduce the share count and can improve per-share measures, but they also compete with other uses of capital.

Telstra continues to fund mobile network investment, fibre infrastructure and strategic projects, so the scale of future buy-backs will need to remain consistent with those requirements.

FY26 Dividend increases to 21 cents

Telstra declared a final FY26 dividend of 10.5 cents per share.

Together with the interim dividend, this took the full-year distribution to 21 cents per share.

The dividend was predominantly franked, reflecting the group's Australian taxable earnings while also recognising the growing contribution from international activities.

Dividend growth was supported by higher cash earnings.

Future distributions will depend on earnings, cash flow, Capital Expenditure and board decisions.

The combination of dividends and buy-backs meant Telstra returned substantial capital to shareholders during FY26 while continuing to invest in its infrastructure program.

Connected Future 30 sets longer-term targets

Telstra is operating under its Connected Future 30 strategy.

The plan includes a target for mid-single-digit compound annual growth in cash earnings through FY30.

It also targets a return on invested capital of 10% by FY30.

Telstra reported underlying return on invested capital of approximately 9.0% in FY26.

Improving ROIC is important because telecommunications requires large amounts of capital for spectrum, mobile towers, fibre, data centres and network technology.

Higher returns indicate that the Business is generating more earnings relative to the capital invested.

Aura expands Telstra's fibre network

Aura is one of Telstra's major strategic infrastructure programs.

The project involves developing new intercity fibre routes to expand high-capacity connectivity across Australia.

Telstra now expects total investment in Aura to reach approximately A$1.8 billion across the program.

More than 8,500 kilometres of fibre had been deployed as the project progressed during FY26.

The network is intended to support rising Demand from cloud computing, data centres, artificial intelligence workloads and other high-bandwidth applications.

Unlike routine network maintenance, Aura is a strategic investment intended to generate additional long-term revenue.

Higher Aura spending increases the execution task

The estimated cost of the Aura program has increased from earlier expectations.

This raises the amount of capital that needs to be deployed before the project produces its full economic contribution.

Telstra has indicated that it expects the project to generate attractive long-term returns, but those returns depend on future demand for high-capacity connectivity.

Large infrastructure programs can also face timing, construction and customer-demand risks.

Aura therefore represents both a growth opportunity and a significant capital-allocation commitment.

Its progress will remain relevant as Telstra balances strategic investment with dividends and buy-backs.

FY27 EBITDAaL guidance points to further growth

For FY27, Telstra expects underlying EBITDAaL of approximately A$8.5 billion to A$8.8 billion.

The guidance points to another year of underlying earnings growth if achieved.

Cash EBIT is expected to be approximately A$4.75 billion to A$4.95 billion.

Telstra has increasingly emphasised cash EBIT because it incorporates both operating profitability and business-as-usual capital expenditure.

This measure is intended to align management more closely with the amount of cash generated after maintaining the core network.

Capital expenditure remains substantial

Business-as-usual capital expenditure is expected to be approximately A$3.35 billion to A$3.65 billion in FY27.

Strategic investment is expected to add a further A$200 million to A$300 million.

These figures highlight the capital-intensive nature of the telecommunications business.

Even when earnings grow, a large portion of operating cash must be reinvested in network capacity, technology and customer infrastructure.

Telstra therefore needs to improve earnings while maintaining discipline over both routine and strategic capital expenditure.

Competition keeps customer retention important

Australia's telecommunications market remains highly competitive.

Customers can move between network operators, lower-cost brands and prepaid alternatives.

Telstra's large network footprint gives it broad geographic coverage, but that advantage does not eliminate price competition.

The FY26 combination of higher ARPU and slightly lower mobile service numbers illustrates the challenge.

Telstra can increase revenue through pricing, but the value proposition must remain sufficient to retain customers.

FY27 subscriber trends will therefore help indicate how much additional pricing flexibility remains.

International connectivity adds another growth avenue

Telstra also operates international connectivity infrastructure.

Its activities include subsea cables and network services linking Australia with major markets across Asia and other regions.

Demand for international data capacity is increasing as cloud computing, streaming, artificial intelligence and data-centre activity expand.

These operations diversify Telstra beyond the domestic consumer telecommunications market.

However, international infrastructure also requires significant capital and competes with other network operators for large enterprise and wholesale customers.

What could shape FY27 performance?

Mobile pricing and customer retention will remain central.

Further ARPU growth could support revenue, but subscriber trends will show whether customers continue accepting higher pricing.

Productivity measures provide another earnings lever, particularly as Telstra simplifies operations and technology systems.

Capital expenditure will remain substantial, with Aura and other network investments requiring continued funding.

The second A$1 billion buy-back will also affect capital allocation and per-share measures.

FY27 guidance points to continued growth in underlying EBITDAaL and cash EBIT, but delivering that outcome will depend on balancing pricing, cost control, customer retention and infrastructure investment.

FY26 showed that Telstra could increase cash earnings even with a modest decline in mobile services. The next phase will test whether the company can maintain that earnings trajectory without allowing customer losses or capital requirements to offset the benefits of higher revenue per user.