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Telstra warns of $850m revenue hit from regulation |
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by Stuart Corner
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Tuesday, 06 September 2005 |
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Telstra has
launched its biggest attack yet on the government's attempts to tighten the regulatory reins, telling the
Australian Stock Exchange that current and expected regulatory imposts will
knock an estimated $850 million off its revenues in the current financial year.
In the
statement Telstra said "In addition to the costs of regulation that have
been widely addressed, revenues lost to regulatory decisions are large and
growing each year. In 2005/06, regulatory price reduction decisions that have
already been made or are pending are likely to cost Telstra more than $850
million in lost revenues and have been factored into the company's earnings
outlook."<br><br>Also this figure does not include the impact
of two 'biggies': operational separation and the de-averaging of ULL prices.
Telstra said: There are two pending decisions that are material for Telstra:
(1) operational separation as briefed last week by DCITA and (2) pricing for
the unbundled local loop, which includes proposed ULL prices that are
deaveraged and below Telstra’s costs. Telstra will inform the market when it is
in a position to quantify the financial and operational impact of these
decisions."<br><br>The statement explained that the board had
decided to "clarify the earnings outlook for the company" in the
light of " trading results for the first two months of the current
financial year and considered preliminary data emerging from the CEO's
strategic review of management and operations and a briefing by DCITA last week
on " their proposal to expand the regulation of Telstra".<br><br>The
statement said: "The company's earnings before interest and tax in 2005/06
are expected to decline by 7-10 percent compared to 2004/05 as a result of
accelerating declines in PSTN revenues and softening growth in the mobiles
market due to aggressive pricing and "bucket plans". The accelerating
decline in PSTN revenues reflects the influence of two forces: (1) downward
pressures that are industry-wide, which management will address in its
strategic review, and (2) regulatory decisions that result in direct material
reductions in revenues."<br><br>The statement was also worded
so as to create particular unease in the National Party and to anyone worried
about the future of communications services in regional and rural Australia. It
said: "Telstra's CEO, and the board agrees, has said that "Telstra's
ability to halt and reverse the decline in earnings in future years depends not
only on effective management but also on regulations and administrative
practices that do not continually impair shareholder value with initiatives
like operational separation and below-cost de-averaging that takes away
revenues used to support services to high-cost areas in regional and remote
Australia."<br><br>Shortly following the announcement,
Telstra's CEO Sol Trujillo and CFO John Stanhope held an hour long
teleconference Q&A session for press and analysts.
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