Little growth on Telstra's horizon

Stuart Corner
Thursday, 11 February 2010 16:00

IT Industry - Market

In the wake of reporting declines in key financial indicators for the half year to 31 December, Telstra had little good news for shareholders in its guidance for the rest of the year.

Telstra has reported a 2.5 percent decline in revenues, 0.3 percent decline in EBITDA and 3.3 percent decline in net profit for the six months to 31 December driven in large part by what it says was an unexpected acceleration in the decline of PSTN usage.

However when the results are adjusted for the divestiture of Kaz and for currency exchange rate movements, the revenue decline fell to 0.7 percent and EBITDA was marginally positive, 0.2 percent. Adjusted after tax profit was up 13.0 percent

To portray the results in as favourable a light as possible, Telstra's announcement focussed on the 37 percent increase in free cash flow.

CEO David Thodey held out little hope for any improvement in the short term, saying: "Our biggest challenge is around the PSTN decline. As we look at our December and January results we believe that the top line revenue will continue to be under pressure and while we are taking a number of initiatives we don't expect those to flow through in this calendar year so now we are expecting low single digit decline in the top line revenue sales for this year.

"The remainder of our guidance remains unchanged...We must continue to invest in the business and we are maintaining our target of $6b free cash flow."

Telstra's guidance is for low single digit revenue decline, low single digit EBITDA growth and to maintain its EBITDA margin on sales revenue. It expects accrued capex to remain at 14 percent of sales.

One analyst at Telstra's results briefing, Ian Martin, was not impressed. He told Thodey: "Here we have in this half major changes in calling rates and the systems you have [those on which Telstra has spent billions of dollars under its much vaunted IT transformation] have not helped you anticipate those. Your reactions have been right at the end of the half year instead of as these things were occurring.

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