Telstra reaffirms guidance; will maintain dividend

Friday 19th November 2010

Telstra Corporation, Australia’s biggest phone company, reaffirmed that it expects “a high single-digit percentage decline” in earnings before interest, tax, depreciation and amortisation (EBITDA) on "flattish" sales for the year ending June 30, 2011.

“I currently expect our half-year results will show higher customer numbers, a low double-digit decline in EBITDA as a result of increased redundancy costs in the first half and a change in the recognition of revenue from the Sydney Yellow Pages from the first half to the second half,” chief executive David Thodey told the annual shareholders' meeting.

Telstra reported a 1% decline in EBITDA to A$10.85 billion (NZ$13.79 billion) for the year ended June 30.

Thodey also reiterated previous guidance that the phone company's free cash flow will be between A$4.5 billion and A$5 billion in the year ending June 2011 compared with A$6.2 billion in the 2010 year.

Telstra chairwoman Catherine Livingstone told the meeting Telstra's board intends to maintain its dividend at a fully-franked 28 Australian cents per share for the current year and the following year.

“This is, of course, subject to the board's normal process for the declaration of dividend at each half year, and there being no unexpected material events,” Livingstone said.

She said concern about whether Telstra's dividend is sustainable is one of several factors putting pressure on its share price.

Other factors include Telstra's lack of growth, uncertainty about its strategy and uncertainty surrounding its negotiations with Australia's government over its A$43 billion National Broadband Network (NBN) plans.

Thodey says Telstra “remains strong and in an excellent position to capitalise on the emerging market opportunities. The NBN negotiations also remain critically important.

“We are keen to see the negotiations move forward as quickly as possible with the government and NBN. We are very clear on what is required to conclude these negotiations so that we can bring this proposal back to you for a decision.”

Telstra shares climbed 3.1% to $3.34 on the NZX and gained 2.3% to A$2.62 on the ASX.

(BusinessDesk)

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