Telstra profits plummet

10 Aug 2006

Australian incumbent Telstra failed to halt a worrying decline in earnings as profits for its year ended 30 June 2006 fell 26.2% to AUD3.18 billion (USD2.45 billion), hit by high cost investments as part of its long-term year plan to adapt to Australia’s increasingly competitive telecoms market. Revenues (excluding financial income) rose 1.03% to AUD22.77 billion, due to strong performances in broadband, mobile, directories, IP solutions, inter-carrier services and pay TV bundling. However, growth was again offset by declining revenues from traditional fixed line services. Expenses increased 13.8% to AUD13.52 billion, due to restructuring costs and redundancies; EBITDA fell 8.4% to AUD9.58 billion.

Telstra ended June 2006 with 9.94 million basic fixed lines in service, down 1.8% year-on-year. Total broadband subscribers grew 66.5% to 2.9 million, of which 1.48 million were retail and 1.43 wholesale. At that date Telstra had 8.49 million mobile subscribers, of which 317,000 were 3G users, as well as 119,000 wholesale mobile lines, of which 73,000 were CDMA and 46,000 GSM.

On Monday Telstra announced that its proposed AUD4 billion fibre-to-the-node (FTTN) project had been scrapped. The telco, which was in negotiations with regulatory body the ACCC as late as Sunday morning, argued that it could not justify going ahead with the scheme under the regulations proposed by the competition watchdog. Telstra’s shares immediately lost 2% of their value, prompting fresh doubts over the government’s plan to sell its majority share in the operator. Communications Minister Helen Coonan expressed her disappointment at the news, but stated today that she believed neither the announcement nor the declining share value would delay a decision on the sale.

Australia, Telstra (incl. Belong), Telstra Mobile