Telstra trims capex

Stuart Corner
Thursday, 25 May 2006 19:11

IT Industry - Strategy

Telstra has revised downwards by $700 million its capex estimates for the year to 30 June, from between $4.8bn and $5.1bn, given in its market guidance on 9 February 2006 to between $4.1bn and $4.4bn as a result of project delays and tighter fiscal policy.
Telstra says that, of the $700 million reduction, approximately $200m is deferred to the 2006/07 fiscal year.

"Management’s focus has been on optimising project performance and contractual outcomes to deliver shareholder value during the transformation of the company".

Telstra says cost saving have been achieved as a result of lower costs for property, plant and equipment thanks to its "tough procurement contract negotiations and improved capital labour productivity across all projects".

It has also stopped some "discretionary projects that were not aligned to the transformation strategy," and obtained efficiencies from merging some transformation projects and reducing program work in some areas

Capex deferrals have resulted from what Telstra says were "minor delays" of 8-10 weeks in its business support systems transformation "due to some industry changes and some outstanding contract negotiations" and "minor delays" of four to five weeks in its "wireline transformation" due to delays in the completion of key network architecture design. It claims that all other aspects of the transformation strategy remain on track.

The initial guidance did not factor in any capex on the FTTN project which "remains on hold." Nor is capex for this project part of the revised guidance.