Telstra reaps returns of cost-cutting

12 Aug 2004

Australia’s largest telco Telstra Corp today reported net profits of AUD4.118 billion for the year ended 30 June 2004, a rise of AUD689 million over the year, thanks to a series of cost-cutting measures which helped offset weak growth at its core domestic operations. The company said total revenues grew by 1.2% to AUD20.69 billion, of which AUD19.165 billion came from its domestic activities, a rise of AUD451 million or 2.4%. Underlying earnings before interest and tax (EBIT) were up AUD135 million, or 2.1%, to AUD6.692 billion, with reported EBIT increasing by AUD837 million (14.6%) to AUD6.56 billion.

The company, which is 51% owned by the government, said it expected underlying revenue growth to be positive in the current financial year, with the rate of cost growth to be kept below the rate of revenue growth. Chief Financial Officer John Stanhope told reporters, ‘The free cash position of the company is strong and we are on track with our AUD800 million cost reduction programme’. In February Telstra reported a 94% rise in half year net profits to AUD2.29 billion following a AUD965 million writedown in the corresponding period in 2002/03 on its stake in the REACH cable joint venture with Hong Kong’s Pacific Century CyberWorks (PCCW). After a series of failed overseas ventures, Telstra is concentrating on expanding its domestic business offerings, particularly in the areas of wireless technology, high bandwidth internet and content services. It faces strong competition in the mobile market from Optus and Vodafone, with the former reporting a 1% increase in market share to 35.3% during the year to 30 June. Telstra, which last week agreed to pay AUD450 million for a half stake in Hutchison Telecommunications’ (Australia) 3G network, said it had increased its mobile market share by 0.3% to 47% in the three months to the end of June.