Telstra profit takes a big hit but but reaches agreement on NBN Co deal

Telstra profit takes a big hit but but reaches agreement on NBN Co deal

Net profit declines 36 per cent to $1.2 billion for the first half of the financial year

Telco giant, Telstra, has reported a net profit decline of 36 per cent to $1.2 billion for the six months to December 31.

Sales revenue also took a 0.5 per cent ($60 million) dip to $12.263 billion and earnings before tax fell 13.9 per cent ($737 million) to $4.58 billion compared to the previous half-year.

The telco indicated it was on track to regain market share in key product areas on the back of achieving strong growth in customer numbers.

“Last August, we announced a strategy to improve customer service, to increase our customer numbers, to simplify the business and to invest in new growth businesses,” Telstra CEO, David Thodey, said in a statement.

“Our strategy is now bearing fruit with the encouraging sales momentum reported in the first quarter of 2010/11 continuing for the half-year. We are also enjoying the strongest customer momentum in over a decade and revenue growth across our three retail segments with costs in line with our expectations.

“Telstra’s initiatives to improve customer satisfaction, reduce churn and simplify the company are on track. Customer satisfaction scores have improved over the half year and we are on track to achieve savings of $250 million in 2010/11. These savings will increase substantially over time,” Thodey said.

The company’s initiatives in mobiles are delivering immediate benefits, with continued strong growth and improving margins expected in the second half.

“We recognise the need to translate customer growth into revenue and profitability, but as customer numbers are a leading indicator of financial performance, we believe that Telstra’s strategy remains on track,” he said.

Thodey indicated the telco had finalised key commercial terms with NBN Co, passing an important milestone in the proposed agreement. This is expected to deliver approximately $9 billion in post-tax net present value.

He said Telstra reached an in-principle agreement with the Federal Government over the specific measures that are expected to deliver a further approximately $2 billion in post-tax net present value.

The total post-tax net present value of the transaction is about $11 billion.

“This important milestone represents substantial progress. During the last eight months we have negotiated constructively over a range of extremely complex matters,” Thodey said.

“We are working to complete the necessary documentation. As soon as this is finalised by both NBN Co and Telstra, Telstra will be able to provide detailed information on the substance of the proposal. While there is still work to be done, we are on track to put the proposal to shareholders with a target date of 1 July 2011.”

The telco said its network was very resilient during the recent natural disasters in Queensland, Victoria and Western Australia. However, as the clean-up continues, the company will experience higher than average fault volumes for some time, and will focus on minimising the impact on customers. It isn’t in a position to quantify the financial impact for some time.

More to follow.

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Tags Telstranbn coTelecommunicationsDavid Thodey

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