U.S. News

Australia's Telstra Net Profit Rises 2.9%, Missing Forecasts


Telstra, Australia's largest phone company, said its 2007 net profit rose 2.9%, below analysts' forecasts, although mobiles and broadband revenues were strong, and offered a "prudent" outlook for 2008.

For the fiscal year ending June 30, Telstra posted a net profit of A$3.28 billion (US$2.83 billion), up from A$3.18 billion in 2006, as revenues increased 4.2%.

That fell short of analysts' forecasts of a 5.7% rise to A$3.36 billion, according to a Reuters Estimates survey of 13 analysts. Estimates were for a 3.6% increase in revenues. Telstra said for 2008, it "prudently" expects revenue growth of 2% -3% and earnings before interest and tax growth of 3% -5%.

That was well below some analysts' expectations, with UBS looking for a company estimate of 12% -14% EBIT growth, and at the low end of consensus estimates of a 5.1% rise.

Telstra slowed the decline in fixed-line revenues over the past year to 4.1%, while mobile revenue was boosted by a big increase in mobile data and broadband subscriber growth was strong.

Mobiles revenue rose 13.9% and retail broadband was up 66.2%, Telstra said.

Telstra has said 2007 will be the heaviest year for costs associated with its five-year overhaul, begun in November 2005, to reduce dependence on fixed-line revenues, and said on Thursday its overhaul was "on time and on track".

Telstra has said fixed-line revenue, which currently makes up 30% of sales, will decline to about 20% by 2010 as the new drivers of the business expand.

Restructuring costs were booked mainly in the first half, with first-half pretax profit down 20%, but the second half forecast to be up 37% to 40% from the 2006 second half.

The company's shares have added 14.3 % this year, outpacing a 7.6% gain in the broader market.

Telstra, once a government-owned monopoly, last week renewed its legal and anti-regulation campaign, mounting a court challenge to the Australian government's decision to award main rival Optus A$958 million in funding for broadband in remote areas. Optus is owned by Singapore Telecom.