Telstra Profit Is Up 13%, Beats Forecasts


Telstra, Australia's largest phone company, beat expectations with a 13 percent increase in first-half profit, helped by rapid mobile phone and broadband subscriber growth, and lifted its 2008 guidance.

The former government monopoly upgraded its full-year forecast to earnings growth before interest and tax of 6-8 percent, up from a November forecast of 5-7 percent.

Telstra said net profit before one-offs in the six months to Dec. 31 rose to A$1.926 billion (US$1.77 billion) from A$1.704 billion.

That was above average of market forecasts of A$1.76 billion, according to a Reuters survey of seven analysts, and near the top end of the range.

The company said mobile phone revenues rose 14.5 percent to A$3.1 billion, while retail broadband revenue jumped 65.2 percent to A$844 million as it continued to gain market share with subscriber growth of 50.5 percent.

Telstra is two years into a five-year overhaul to slash costs, increase margins and diversify away from the declining market for fixed phone lines. It says the benefit of cost cutting will become evident in 2009. 

Labor costs, excluding redundancy costs, declined 1 percent in the six months, and Telstra said it was starting to see a positive impact on costs from productivity improvements.

It maintained its forecast of accrued capital expenditure of A$4.6-A$4.9 billion in the fiscal year to June 2008.

Telstra has outperformed its global peers on arresting the decline in higher margin fixed line revenues, helped by being the dominant player in a fast-growing local economy.

It said on Thursday fixed-line revenues declined 2.1 percent, the fourth consecutive six-month period the decline has slowed. That compared with a 2.5 percent decline in the six months to June.

The company's shares have been flat this year, beating a 13 percent decline in the broader market, as investors switch into defensive stocks amid market ructions.