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Telecommunications Telstra lowers guidance, blasts ACCC, vows to retain market share
Telecommunications Telstra lowers guidance, blasts ACCC, vows to retain market share | Telstra lowers guidance, blasts ACCC, vows to retain market share |
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| by Stuart Corner | |
| Monday, 21 August 2006 | |
  
Analysts questioned the reduced values in the revenue and EBIT guidance. Telstra justified these by saying it expects the reduction in the wholesale ULL price to flow through to retail and that it will have to reduce its own retail prices to maintain its share of the broadband market. "The earnings guidance assume the pass through of the lower price into retail pricing which we may have to match and it is assuming we will fight for market share," CFO John Stanhope said. Telstra's fiscal 2007 outlook is now as follows (10 August figures in parentheses): • Revenue growth of 1.5 to 2.0 percent (2-2.5 percent) • EBIT growth of +2 to +4 percent (+4 to +6 percent); • Underlying EBIT (excluding transformation costs) -2 to -4 percent (0 to -2 percent); • Operating cash capital expenditure of between $5.4 and $5.7 billion (unchanged). This guidance assumes no FTTN build, a Band 2 ULL price of $17.70 applying for all wholesale customers for the remainder of fiscal 2007, no additional redundancy and restructuring provisioning and fiscal 2007 being the largest transformational spend year. Telstra said it was unable to give guidance on ordinary dividends for the fiscal 2008 year owing to the remaining uncertainty attached to regulatory outcomes and impacts. Justifying the decision to maintain the dividend despite the more pessimistic outlook, CEO Sol Trujillo said: "The board had very significant conversations about the shareholders and protecting them as far as we can in the near term from some of these negative decisions [taken by ACCC]." He denied that the decision, or its timing, had been influenced by the fact that a decision by the government on the sale of its remaining 51.8 percent stake in Telstra will be taken in the next day or two. Telstra defended its decision to base earlier guidance on the $22 figure for the ULL in band 2 even though it knew the ACCC was almost certain to set $17.70 in its interim determination of a number of ULL access disputes. It that $22 was "the most reasonable and reliable assumption at that time, particularly as it was the last price mandated by the ACCC prior to the issuing of the first interim determination on the evening of 11 August 2006, it was the lowest actual price being paid by customers at that time, and Telstra had been in discussions with the ACCC about ULL pricing at various levels above those that were contained in the interim determination." Telstra also revealed that, since the first interim determination was issued on 11 August, the ACCC has since issued several other interim determinations at $17.70. Telstra said it expected the same outcome in other pending interim determinations. |
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