Telstra finally delivers good news with $1b 3G launch

Stan Beer
Friday, 06 October 2006 11:08

Business IT - Networking

In other news, Telstra claimed to be on track to achieve its stated five year transformation plan to rebuild Telstra and bring broadband to all Australians.

Telstra provided the market with updated long term management objectives up to 2009/10 -

- Revenue growth of 2.0 to 2.5% p.a. as increased revenues from 3G, IP Telephony and greater HFC penetration to some extent offset losses from adverse regulatory outcomes on FTTN enablers and ULL. New product revenue will be in excess of 30% of sales revenue.

- Cost growth of 2.0 to 3.0% p.a. as the absence of FTTN removes some savings that were expected to flow from the replacement of copper lines.

- EBITDA of 2.0 to 2.5% p.a. and EBITDA margin of 46 to 48% by 2009/10 because of higher cost growth.

- Workforce numbers down by 12,000, consistent with the objective of 10,000 to 12,000 that was previously outlined and reported in November 2005.

- Capex to sales ratio of 10 to 12% of revenue by 2009/10 because of substantially reduced capex as the transformation progresses.

- Free cashflow of $6 to $7 billion by 2009/10 (on an A-IFRS basis).

Strong performance in July & August 2006

The company also released data on its performance in the first two months of 2006/07, which will be the largest 'spend year' of the transformation -

- Sales revenue is up 3.3%. This includes retail broadband up 41%, mobiles up 9.0% and Sensis up 10.6%

- Cost growth continues up 10% -. This reflects labour costs down 3.6% owing to the smaller workforce; growth in cost of goods sold as volumes increase; and transformation-driven expenses, depreciation & amortisation.

- EBIT for the two months declined 8.6% compared to the company's first-half outlook of minus 17 to minus 20%, due to cost-acceleration in the first half-year due to the transformation and other one-off impacts.

- No change to the 2006/07 outlook issued on 21 August 2006, with full-year EBIT expected to increase by 2 to plus 4%, and second half EBIT to grow in the range of 37 to 40%.

"Telstra is already turning the corner and we will record more impressive earnings growth as the one-off costs associated with new investment, redundancy and restructuring, and accelerated depreciation begin to subside later in fiscal year 2007," Mr John Stanhope, Chief Financial Officer, said today.


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