Fixed-line slumps as Telstra profit slides

The nation's biggest telco Telstra today unveiled another lacklustre financial result, with its overall sales revenue declining by 2.2 per cent over the past year and net profit after tax also slumping 4.7 per cent.

The nation's biggest telco Telstra today unveiled another lacklustre financial result, with its overall sales revenue declining by 2.2 per cent over the past year and net profit after tax also slumping 4.7 per cent.

David Thodey

Telstra CEO David Thodey as he presents the telco's lacklustre financial results this morning. (Credit: Telstra/Delimiter)

The telco brought in $24.8 billion in sales revenue over the past year, a figure down $558 million on the previous year, with earnings before interest, tax, depreciation and amortisation (EBITDA) down by $101 million to reach $10.85 billion. The company's net profit after tax declined by 0.9 per cent to reach $3.83 billion.

One of Telstra's key problems is the continuing decline in its traditional fixed-telephony business, with revenues in that segment dropping by 8 per cent over the year.

Despite the slump, the company was keen to point out that its free cash flow had increased, exceeding its plans slightly, by $1.9 billion to reach $6.2 billion. Some of that will be paid out to shareholders in a fully franked dividend of 28¢.

In the company's financial results briefing this morning, Telstra chief executive David Thodey briefly hinted that Telstra would shortly be making investments that would allow it to secure its future. However, he quickly turned the briefing over to chief financial officer John Stanhope, who has not yet disclosed any large planned investments by the company.

In Telstra's earlier statement this morning, Thodey said 2010 had been a "challenging" year, but the telco had started to see improving momentum in key products, and positive growth in Telstra's business and government divisions — as well as a growth in profits at Sensis — in the second half of the financial year.

"Telstra is addressing the fixed-line challenge with innovative new fixed products like the T-Hub home phone, which now has more than 40,000 users, and the T-Box internet TV service, which now has more than 15,000 users," said Thodey.

"In the coming year, we must prepare Telstra for the future, invest to take advantage of new revenue streams, and utilise our upgraded IT systems and networks to further improve customer service and satisfaction."

Thodey added that Telstra's new bundled plans unveiled last year had proven popular — with nearly 300,000 customers signing up for them — and it also picked up 11,000 new fixed broadband customers in the second half of the financial year.

A significant part of Telstra's future is up in the air, with Labor and the Coalition having remarkably different policies for how they will deal with the telecommunications sector after the election.

Thodey said Telstra would continue to work "constructively" with the government of the day, regardless of the outcome of the Federal Election.

In terms of the next year, Telstra expects to increase its customer numbers, but only "flattish" revenues. Because of undisclosed investments and its changing product mix, the telco expects a "high single digit percentage decline in EBITDA and free cash flow of between $4.5 billion and $5 billion.