Telstra beats expectations thanks to mobile services

Telstra has recorded a significant jump in revenue thanks to its mobile services, broadband and IP solutions, but has continued to lose market share in the wireless broadband sector.

Telstra (ASX:TLS) performed above market expectations, recording a 10.3 per cent rise in full-year profits to $4.07 billion. The company’s free cash levels reached $4.4 billion, jumping by 13.2 per cent.

Mobile services made up 27 per cent of total group revenue and its product sales rose by 10 per cent to $6.1 billion. Fixed retail broadband sales rose 15.9 per cent. IP & Data Access sales rose 8.1 per cent, buoyed by Telstra’s Next IP network.

According to details released by Telstra, market demand for its products remains strong with wireless network traffic doubling every 19 months. The telco’s mobile data revenue rose by 31 per cent and the number of wireless broadband services in operation (SIO) rose by 99 per cent.

But its market share in the wireless retail broadband sector dropped from 51 per cent in the first half of 2008 to 42 per cent in the second half of 2009. The results coincide with Vodafone Hutchinson Australia reporting one third of its average revenue per user.

Fixed broadband market share dropped from 47 per cent in first half of the financial year to 46 per cent in the second half. Mobile revenue market share dropped from 43 to 42 per cent in year on year results.

Telstra expects low single digit percentage rises in year-on-year sales revenue and EBITDA growth with free cash flow expected to hit $6 billion by 2010.

The outlook isn’t entirely rosy, however, with the Government’s plans to build a national broadband network (NBN) and potentially separate Telstra’s retail and wholesale divisions hanging over its outlook.

“[Outcomes of the Government’s regulatory review] will be implemented via legislation to be introduced to parliament by the end of 2009,” Telstra’s full year report stated.

“The outcome of this process is likely to increase Telstra’s regulatory obligations and the associated costs to our business.”

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