Telstra has laid the blame for its financial problems squarely at the feet of the federal government, savaging the NBN policy for taking a financial bite the size of Qantas out of the telco’s profitability.

Facing what analysts believe will be a hostile AGM - with a stiff challenge to Telstra’s executive pay firmly on the cards - the national carrier sought to get ahead of shareholder anger by taking a swipe at the government.

Chairman John Mullen said that the NBN would leave a profitability hole that would be hard to fill.

“The NBN is the single biggest impact on Telstra’s financials, and the impact is profound,” Mullen said.

“The NBN will have reduced Telstra’s net profit after tax by close to a half when fully rolled out. Not a few percent, half.

“Having been privatised by the government in 1997, the government is now effectively re-nationalising half of the company again.

“To give some scale to that impact, what we are losing through this policy of half our business is approximately equivalent to a company the size of Qantas.”

Telstra said the huge cuts to net profit reduced its ability to pay out dividends to shareholders.

“When a company loses up to half its net profit to such a government decision, the impact on its results, on its dividend, and on its share price is obvious,” Mullen said.

The attack ramped-up earlier criticism by CEO Andy Penn that the NBN impact would result in financial pain for Telstra extending into 2019.

Critics wrong, job cuts begin

Mullen attacked “critics” who argued Telstra isn’t doing - or hadn’t done - enough to counter the impact of the NBN.

“It is easy for critics to say ‘well just come up with a plan and a strategy to fix this’, or ‘fire the board and the management team and everything will be OK again’, but there is no magic bullet that can fix the loss of up to half of a company’s net profit,” he said.

“We need to get real about this and acknowledge it for what it is.

“My board colleagues and I are acutely aware that for many retail investors, in addition to their portfolio valuation, the dividend is an important part of their retirement income.

“I would love to be able to stand before you and say that all this change is just a temporary blip and we will soon be back to the old stable world of legacy profits and an ever increasing dividend, but I cannot. Telstra’s world has changed and it is going to keep on changing.”

Telstra is hoping to reform its business through the T22 strategy announced earlier this year. The strategy includes cuts of up to 9500 of the telco’s “more than 30,000 employees”.

Mullen said the cuts would continue until Telstra had transformed.

“Let me be clear - the objective is not to create a specific number of job losses but rather it is to radically transform interaction with Telstra to a largely digital process,” Mullen said.

“The job losses will be the end result of this transformation, not the goal in itself, and so the precise number of jobs to be lost will not be clear until we complete the program.”

However, job losses were inevitable as the telco moved to automate aspects of service delivery.

“At every AGM the issue of service performance is raised and every time we assure you that we are focussed on improving customer service,” Mullen said.

“We continue to make progress and are materially improving every year, yet there will be many people here today including friends and family of all of us, who can recount a bad customer service outcome from Telstra from time to time.

“The reality is that Telstra is simply too big and too complex to ever 100 percent fix this issue while we rely on manual intervention."

CEO Andy Penn said that "more than 2600 roles" had already been cut.

Telstra has also already "reduced 1-2 layers of management across most of the organisation and increased the spans of control across the top 300 leaders in the company by 30 percent" under the changes.