Telstra confirms earnings guidance

Wednesday 28th October 2009

Telstra has confirmed its earnings guidance and talked up the prospects for its A$12 billion systems upgrade to deliver earnings, irrespective of whether it is forced into structurally separating its assets.

Chief executive David Thodey reiterated financial guidance for 2009/10 that the company would "achieve free cash flow of A$6 billion, low single digit growth in revenue, EBITDA and EBIT, and maintain its EBITDA margin".

"The appreciation of the Australian dollar has created pressure on revenue earned from overseas subsidiaries."

An investor presentation released with the company's statement to the ASX contained no information about the New Zealand operation, but dwelt on the costs of structural separation under various alternative models, and burgeoning prospects in Chinese new media properties.

The company is attempting either to avoid or be compensated for the likely requirement that it cede chunks of its broadband network and customers to a federal government-owned competitor, the National Broadband Network, which has A$43 billion to build a national broadband network after Telstra chose not to in 2006.

"The company requires continuity and stability in the current environment," said Thodey. "We must focus on our core business and our customers - this is where we create value for shareholders."

The four year, A$12 billion programme of investment in new customer service platforms would improve Telstra's retail competitiveness "irrespective of regulatory settings and the NBN, and ultimately deliver shareholder value".

It had also already delivered A$5 billion in incremental revenue compared to consensus forecasts.

Telstra's retail strategy would focus in four main areas:

Substantially improving and lowering the cost of customer service;
Moving "up the value stack" into "profitable and fast-growing markets for online content, applications, products and services";
Expand into complementary markets such as IT storage, security, and web-hosting;
Add value to the home telephone by integrating telephony, Internet and media player.

Businesswire.co.nz

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