Australia's dominant telecommunications company Telstra Thursday reported a surprise slump in first-half profit with its fixed-line and mobile businesses taking a hit amid increased competition and a shift towards digital.

Net profit after tax for the six months to December 31 fell 14.4 percent to Aus$1.79 billion (US$1.38 billion) from the previous corresponding period.

The figure sent Telstra's share price tumbling 4.43 percent to Aus$4.96 in mid-day trade in Sydney.

"It's a weak result... you've got revenue and underlying profit all missing (market expectations) by a decent chunk," IG Markets chief strategist Chris Weston told AFP.

"The implied volatility in a stock like Telstra is so low that this is as big a miss you are going to get."

Revenue for fixed-line services dropped by 4.7 percent and by 8.7 percent for mobile services for the period. Overall sales revenue dipped by 3.4 percent to Aus$12.79 billion.

The company declared an interim dividend of 15.5 Aus cents.

Chief executive Andrew Penn said Telstra had "performed well in a highly competitive market".

"Data volumes have increased and intense competition on pricing across fixed, bundles, mobile, data and IP has had an impact.

"Those are in parallel with the acceleration of the rollout of (the National Broadband Network) which, over the longer term, will have a negative impact on EBITDA (earnings before interest, taxes, depreciation and amortisation) of Aus$2-3 billion."

The NBN, or national broadband network, aims to connect most Australian homes to superfast Internet over the next few years, replacing Telstra's existing copper network.