Telstra's Profit Falls 20% on Costs Of Overhaul, but Outlook
By Lyndal McFarland
The Wall Street Journal
Thursday, February 15, 2007
SYDNEY, Australia -- In its first result since being freed
from government ownership, Telstra Corp. said first
half-profit fell 20%, hurt by restructuring costs, but the
Australian telecommunications group boosted its full-year
outlook as it takes market share from rivals.
Telstra, led by former U.S. West chief Solomon Trujillo, is
in the middle of a five-year transformation plan, which
includes massive investments to upgrade networks as well as
Telstra said net profit in the half fell to 1.7 billion
Australian dollars (US$1.33 billion) from A$2.14 billion.
Revenue rose 2% to A$11.65 billion from A$11.42 billion.
"We are on or ahead of our transformation plan on all
fronts," said Mr. Trujillo. "We are winning where it
matters -- in 3G, broadband and digital online offerings,"
Telstra now expects full-year earnings before interest and
tax to grow 3% to 5%, up from its previous estimate of 2% to
4%. It also raised full-year revenue-growth estimates to a
range of 2.5% to 3% from a prior range of 2% to 2.5%.
Investors welcomed the upgrade, which comes less than three
months after the A$15.5 billion share sale last year that
removed Canberra as the majority stakeholder in Telstra.
Telstra's mobile revenue rose 12% to A$2.8 billion and Mr.
Trujillo said 707,000 "high-calorie" third-generation mobile
subscribers were added during the half. He said the group
has signed up 415,000 subscribers to its recently launched
Next G 3G network.
Telstra also added 331,000 broadband subscribers, taking its
market share to 45%, with retail broadband revenue rising to
A$497 million from A$166 million a year earlier.
Meanwhile, the decline in its fixed-line revenue slowed to
5.6% from 7.6% a year earlier.
"There has been a change in momentum in the fixed-line
business," said Mr. Trujillo, who joined Telstra in July
2005 and whose cost cuts and challenges to regulators have
drawn considerable criticism from lawmakers.
Write to Lyndal