Announcing what it describes as a “solid result” for last financial year Telstra increased its profit by 8. per cent ($329 million ) to $4.447 billion.
The amount was just slightly higher than the benefits earned form the company’s ongoing cost reduction program which “extracted a further $300 million in cost savings”.
But Telstra attributes the earnings increase to organic growth and acquisitions such as the Trading Post which achieved the $64 million EBITDA target set for its first full fiscal year.
Solid gains in Internet and mobiles were offset by what Telstra Chief Financial Officer, John Stanhope described as “intensifying competition and accelerating declines in PSTN voice revenues” particularly in “a slower second half”. Rightly Stanhope expects that the trend to continue, according to a company statement.
“It has been a story of two halves – a stronger first half followed by slower growth in the second. Underlying sales revenue for the year grew broadly in line with industry growth, which was a key goal for the company, and we delivered on our commitment to reward shareholders by maximising cash returns,” Stanhope said.
“However, the second half saw accelerating declines in PSTN voice revenues and significant product substitution emerging. Customers are increasingly shifting usage from higher margin PSTN services to lower margin services such as mobiles and broadband. We expect this trend to continue.”
PSTN revenues actually declined by 3.4 per cent or $275 million for the year with a decline of 1.9 per cent in the first half and 5.1 per cent in the second.
Domestic sales revenue increased by 3.5 per cent or $666 million to $19.9 billion, which was toped up by some international to reach $21.5 billion (3.7 per cent growth).
The actually EBITDA amount increased by 2.9 per cent or $295 million to reach $10.6 billion.
Mobile services revenue, including wholesale mobiles, grew by 8.4% while Internet and IP services grew at 35.9 per cent to $1.4 billion. Telstra more than doubled the number of broadband subscribers to 1.744 million (116.4%) adding an extra $307 million.
However, New CEO, Solomon Trujillo, said a strategic review currently being undertaken will call for new sources of revenue and further cost reductions. He said this may change the company’s outlook, but for the moment current regulation, intensifying competition and accelerating loss of PSTN voice revenues will continue to put pressure on Telstra’s top line and margins. The company expects that earnings will likely decline in 2005/2006.