(Updates with CEO comment, adds details on income, network investment)
By Tom Westbrook
SYDNEY, Aug 11 (Reuters) - Telstra Corporation Ltd TLS.AX , Australia's largest telecom company, on Thursday said it would reward shareholders with a A$1.5 billion ($1.2 billion) buyback and invest more in network upkeep as it posted a 36 percent rise in annual net profit.
Telstra forecast mid- to high-single-digit income growth for the 2017 financial year and announced plans to spend up to an extra A$3 billion on improving its mobile networks following a series of disruptions.
"We know that customers expect more from us as their reliance on smart devices continues to grow," Telstra Chief Executive Officer Andrew Penn said in a statement.
"This is why improving the customer experience is paramount, and why network interruptions in the second half were particularly disappointing."
Telstra has suffered seven network outages so far this year. The additional funds are a substantial boost to the A$250 million upgrade it announced in July. income of A$5.8 billion ($4.47 billion) in the year to June 30 included a one-off gain of A$1.8 billion from the sale of its majority stake in Chinese online business Autohome. Excluding the Autohome transaction, pre-tax earnings were broadly in line with analysts' expectations.
A final dividend of 15.5 cents per share, the same as the previous year, took the full-year dividend to 31 cents per share.
Revenue from data services increased by 10.9 percent, Telstra said, largely due to extra customers acquired via the purchase of undersea cable company Pacnet Ltd in 2015.
However, it said income from the mainstay businesses of fixed-voice line and mobiles fell 1.5 percent, due to a regulatory cut in the rate at which that it can on-sell network access, declining popularity of fixed phone lines and network unreliability.
Telstra almost totally wrote off the $270 million investment in made in U.S. video platform company Ooyala, blaming "changing dynamics in the intelligent video market" for the loss. Telstra purchased Ooyala in 2014 as part of a push in to digital media.
Capital expenditure of A$4 billion comprised 15.4 percent of sales and the company said that would rise to 18 percent of sales in 2017, despite the gradual decommissioning of its copper-wire network.
($1 = 1.2963 Australian dollars) (Editing by Jane Wardell and Stephen Coates)