Telstra's Net Rises 14%
By Sam Holmes
The Wall Street Journal
August 13, 2008
SYDNEY-- Telstra Corp.,
telecommunications company, said Wednesday annual net profit
rose 14% from the previous year, boosted by increased mobile and
broadband revenues, but slightly below market expectations.
The firm maintained its long-term guidance and said its
five-year transformation remains on track.
Melbourne-based Telstra said net profit for the fiscal year
ended June 30 rose to 3.69 billion Australian dollars (US$3.21
billion) from A$3.25 billion a year earlier, in a result
analysts said was healthy, but showed vulnerabilities for the
group as it headed into tougher economic headwinds.
Telstra "will need every penny of revenue growth" to hit its
2010 profitability targets, David Kennedy from Ovum Research
said. "Hitting such ambitious profitability targets
requires this process to run smoothly, on budget and on time."
"This is especially the case because there is a question mark
over continued revenue growth in a tough macroeconomic
environment," he said. "The biggest challenge is yet to
The company's share price fell after the earnings report with
investors selling on the below-consensus result and broader
negative market sentiment. Telstra closed 4% lower at
A$4.32 compared with a 2% drop in the overall market.
Analysts had forecast a net profit of A$3.78 billion.
Telstra said revenue rose 4.7% from a year earlier to A$24.8
billion, beating the company's forecast for a 3%-4% improvement,
but below market expectations of 4.8%.
Telstra Chief Executive Sol Trujillo said the company's earnings
growth had been achieved in competitive and unregulated areas of
the business such as mobile voice and data, internet telephony
access, advertising and directories businesses and broadband.
"We have redefined our business by investing to create
competitive advantages and this value differentiation strategy,
underpinned by our customer-centric transformation, sets us
apart," Trujillo said.
Telstra said earnings before interest and tax rose 7.7%, in line
with the group's forecast of 6%-8% growth, but below market
forecasts of 10%. The company held to its target of 6%-8%
earnings growth for 2008-09.
Retail broadband revenue grew 49% to A$1.8 billion and average
revenue per user increased 2.9%, while mobile services revenue
grew 12.3% to A$5.5 billion, boosted by the Next G network's
Detracting from growth was a 3.2% fall in public switch
telephone network revenue to A$6.7 billion, with the company
reporting wholesale line losses to low-cost unconditioned local
loop, or ULL, services.
Telstra Chief Financial Officer John Stanhope said the group
could issue debt either through the domestic or offshore markets
to fund its dividend payment on Sep. 26.
to Sam Holmes at