Telstra profits will continue to drop

Australian telecoms giant Telstra on Thursday said annual profits dropped 4.


7 percent to 3.49 billion US dollars and would keep falling as fixed-line revenues decline and mobile competition heats up.

The former state monopoly said net profits of 3.88 billion Australian dollars would slide by a “high single digit percentage” in the coming financial year on “flattish” sales revenue.

“(Financial year) 2010 was undoubtedly a challenging year as we managed intense competition and an accelerating shift of voice and data to our mobile networks,” a company statement said.

“2011 will be a transition year as we invest to prepare the company to compete in the future,” it added.

No guarantee on NBN

Telstra signed an 11 billion Australian dollar agreement in June to take part in the government’s National Broadband Network, which aims to wire more than 90 percent of homes for high-speed Internet.

But it warned there was “no guarantee” the deal would go ahead. The network is not supported by the opposition coalition ahead of knife-edge national elections on August 21.

“While it is an important milestone, a very significant amount of work must still be done on many complex issues before we can take a final completed agreement to shareholders,” it said.

“As such, there is no guarantee a final agreement will be reached.”

Customers cancel fixed lines

Telstra’s fixed-line revenues fell 8.0 percent to 5.83 billion dollars, while revenues from mobile services rose 5.9 percent to 6.46 billion.

The company said it added 447,000 new mobile subscribers in the year, while more than 200,000 people cancelled their fixed lines and businesses axed the equivalent of about 326,000 lines.

Around 12 percent of households were estimated to be mobile-only, up from eight percent a year earlier.

“Today the greatest asset that Telstra has is our customer base and we have been losing too many customers,” said Telstra chief David Thodey.

“I am not going to allow it to continue.”

Broadband exceeds expectation

Wireless broadband uptake exceeded both mobile data and fixed broadband services, up 34.1 percent to 787 million dollars.

Telstra said it faced “tough” conditions in the Hong Kong mobile market, where its subsidiary CSL World saw revenues decline 6.7 percent and suffered a 168 million dollar impairment charge related to the weaker outlook.

The company said it had managed to reduce labour costs by 10.3 percent, with 12,192 full-time jobs axed since June 2005.

Shares drop

Its shares slumped more than seven percent to 3.01 dollars following the result, which was in line with market expectations. The company announced a dividend of 14 cents per share.

“Telstra has indicated that it’s got potential problems with its infrastructure moving forward and I think it’s a tough environment for them to be in at the moment,” said CMC Markets analyst David Taylor.

Independent analyst Roger Montgomery said Telstra had consistently failed to perform.

“(Telstra) has had virtually no growth in profit in the past decade,” he said.

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