Telco warns again on revenue

Photo / NZ Herald

Australian phone giant Telstra cut its annual revenue forecast for a second time in two months yesterday amid an accelerating decline in demand for fixed-line services.

Revenue will post a "low single-digit decline" in the 12 months ending June 30 compared with the "flattish" result it predicted in December, the company said.

Telstra said first-half profit fell 3.3 per cent to A$1.85 billion ($2.35 billion).

Customers are scrapping traditional services as businesses move to internet-protocol phones and consumers shift to mobile for voice and text messaging.

Telstra's mobile unit, which overtook fixed-lines as its biggest business in 2009, is posting slower growth in wireless services than smaller rival Optus, a unit of Singapore Telecommunications.

"It's disappointing to see the second revenue downgrade in two months," said Theo Maas at Fortis Investment Partners in Sydney.

The result was "operationally weak" and shows the company losing market share in mobiles and fixed-line internet while its phone directories unit is "coming to a complete stop", Maas said.

Telstra's New Zealand subsidiary TelstraClear grew its revenue by 0.9 per cent to $334 million over the six month period or up 0.6 per cent to $348 million when its transtasman business revenues are included.

It said revenue growth of 14.2 per cent in the consumer market had offset tightening in the business market.

When the transtasman revenues are included, TelstraClear's earnings before interest, taxes, depreciation and amortisation (ebitda) remained unchanged on the same period in the previous year at $74 million, with operating expenses up by 0.7 per cent to $274 million.

In Australia Telstra's first-half sales fell 2.9 per cent. The telco affirmed its profit forecasts, with annual free cashflow of A$6 billion and "low single-digit" growth in ebitda.

First-half sales from fixed-line services, known as PSTN, declined 6.9 per cent to A$3 billion, the company said.

"Our customers are now making five fewer local calls a month than a year ago," chief executive David Thodey said. Revenue from wireless services, including mobile phones and internet, rose 4.7 per cent to A$3.2 billion. That compares to 11 per cent growth reported by Optus earlier this week.

"The result is disappointing," Sandra McCullagh, an analyst at Credit Suisse, said.

"Telstra faces the combined forces of rapidly declining PSTN revenue, price competition in mobile, loss of market share in broadband and mobile, and a switch to prepaid wireless broadband."

- ADDITIONAL REPORTING: BLOOMBERG