Telstra profit plummets 26 percent

Stuart Corner
Thursday, 10 August 2006 18:37

IT Industry - Strategy

Telstra has reported an after tax of $3.18 billion for the year - a decrease of $1.13 billion or 26.2 percent on 2005 - and an EBITDA decline of 20.7 percent ($1.44b to $5.50b) . Revenue was up 2.9 percent to $23.10 billion.
Telstra had been forecasting a profit decline of 21-26 percent. Telstra said a major contributor to the profit decline had been expenses associated with its "transformation": a redundancy and restructuring provision of $427 million and increased depreciation and amortisation expense due to bringing forward the closure of the CDMA network and the transformation of the network and systems.

On the positive side, Internet and IP services revenue grew $530 million or 38.5 percent to $1.91 billion, driven by retail broadband revenue growth of $267 million or 57.7 percent and increased use of data services by business customers. Telstra added 303,000 retail broadband subscribers in the second half and 620,000 for the full year, taking the total to 1.48 billion. Telstra added 261,000 mobile services over the year taking its total to 8.49 million, an increase of 3.2 percent.

It did not breakout 3G numbers saying only that "We are building towards market leadership, with subscribers increasing around 500 percent in the second half, including wireless broadband." However, it added that "This 3G lift-off is important as ARPUs are $20 higher than for 2G customers."

PSTN products revenue declined 6.7 percent or $540 million to $7.48 billion. There was an overall reduction in fixed lines: of the 270,000 retail lines lost only 90,000 ended up with wholesalers.

For 2007 Telstra is forecasting revenue growth of 2.0 to 2.5 percent; EBIT growth of 4.0 to 6.0 percent; underlying EBIT (excluding transformation costs) to be flat to minus 2.0 percent; and capex spend of between $5.4 and $5.7 billion - all on the basis that it does not go ahead with its FTTN rollout and that the ACCC sets a band 2 ULL price of $22.

Telstra has declared a dividend of 14 cents per share, fully franked, taking the total ordinary dividend for the year to 28 cents per share, a total of $3.48 billion.