Telstra Sees Slight Drop in Profits and Revenues

Australia's Telstra has reported a 2.5% drop in its second half of last year, to AU$12.32 billion (US$10.8 billion), while EBITDA declined by 0.3% to $5.3 billion (US$4.6 billion). First half net income dropped 1.8% to AU$1.89 billion (US$1.66 billion).

Chief Executive Officer David Thodey said free cash flow increased by $708 million to $2,619 million for the first half of fiscal 2010, and that the company is on track to achieve its target of $6 billion of free cash flow by the end of fiscal 2010, although it now expects a low single digit decline in reported sales revenue for the year.

"Telstra has largely completed its major investments in new networks and operating systems. It is now crucial that we generate returns that reward our shareholders. We are pleased to report that our shareholders will receive a fully franked interim dividend of 14 cents per share for the half year," Mr Thodey said.

Mr Thodey said the competitive challenges highlighted at the company's annual investor update in October remained, with an increase in the rate of decline in fixed products and a further slowing in the take-up of fixed broadband. He said a strong Australian dollar continued to affect revenue from overseas subsidiaries.

"Overall, we have seen a decline in adjusted revenues in the first half despite good performances in mobile data, wireless broadband and IP data. This reflects challenging market conditions due to changing calling behaviors and stronger price competition."

Mr Thodey said Telstra faced strong price competition, acceleration in the number of homes without fixed lines, a stronger Australian dollar, and continuing tough operating conditions in the Hong Kong market.

"Despite these challenges, we expect a modest improvement in the trends in the second half of fiscal 2010 with our new offerings, new pricing plans, and new revenues from major contract wins," he said.