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Telstra profit down sharply in 'distressed' market

Telstra profit down sharply in 'distressed' market

Australia's largest telecommunication carrier, Telstra, saw net profit fall 40.4 per cent to $2.73 billion for its fiscal year, to June 30, on revenue that rose 3 per cent to $18.2 billion.

The figures exclude revenue and earnings from overseas affiliates. Including all affiliates in the Telstra group, revenue rose 8 per cent to $20.19 billion, while net profit fell 10 per cent to $3.65 billion.

Last year, Telstra (excluding affiliates) achieved profits of $4.57 billion on revenues of $17.7 billion, and held up well this year in a global market which CEO Ziggy Switkowski said is full of "distressed" telecommunication companies.

"This is a very satisfactory result in a subdued market," he said in a Webcast. "We are productive, cashed up and fired up."

The mobile and fixed-to-mobile services sector showed strong revenue growth of 10.3 per cent, which offset a decline in revenue from traditional fixed-line telephony services. Internet access was also a strong area, with total Internet subscribers up 32 per cent to 1.28 million subscribers, including broadband subscribers up 115 per cent to more than 168,000 customers, the company said.

The broadband growth rate indicates that Telstra expects to meet its target of 1 million broadband subscribers by the end of 2005, Switkowski said.

Telstra has been upgrading its mobile phone coverage and is poised for a fast rollout of 3G (third-generation) services once a sufficient variety and quality of handsets, along with suitable customer applications, is ready, he said.

In a telecommunication market which will see more consolidation, both in Australia and overseas, Telstra's cash flow will remain strong, according to Switkowski. But Telstra will continue to "unswervingly" focus on improving customer service, he said. "We know we are well short of perfect, wherever we turn."

Telstra reaffirmed its desire to see the company fully privatised, but conceded that this would only happen after extensive debate in Australia's parliament.

Independent telecommunication analyst Paul Budde said that while Telstra is one of the strongest carriers around in financial terms, its strength has come more from cost cutting than from revenue growth.

"By its clever use of delaying tactics after market deregulation, Telstra certainly won the battle in the traditional telco market," Budde said. "But despite all these victories, the overall stagnation in revenue growth is an indication that all is not well on the business side of things."


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