Deal on Telstra split months off: Thodey

Separation so complex it could take six months more to reach a deal

Telstra CEO David Thodey says the telco's separation may be six months off. (File Image)

Telstra CEO David Thodey says the telco's separation may be six months off. (File Image)

Telstra has announced its financial results for the first half of the 2009/10 financial year recording unadjusted declines across revenue, EBITDA and profits after tax and revealing serious underlying problems at the telco.

During the half Telstra’s total reported revenues for 1H10 declined 2.5 per cent year on year to $12.32b. Taking into account the sale of its services arm Kaz, the adjusted revenue was a decline of 0.7 per cent.

Reported EBITDA declined 0.3 per cent, or adjusted, gained 0.2 per cent to $5.32b. Reported profits after tax (PAT) post minorities declined 3.3 per cent, or adjusted, were up 13 per cent.

Spearheading the declines was the telco’s revenue from PSTN services, which declined $222m year on year during the half. ISDN services declined $20m and advertising and directories businesses declined $53m year on year.

Areas of growth during the half: Fixed retail broadband grew $11m; mobile services grew $145m; and IP & access services grew $20m year on year.

Market share during the half has proved to be an ongoing issue for Telstra with both the telco's fixed retail broadband services in operation (SIO) and mobile service revenue continuing its downward trend.

In 2H08 retail broadband share was 48 per cent and mobile revenue was 43 percent. In 1H10 retail broadband share was 45 per cent and mobile revenue 42 per cent.

Speaking at the telco’s analyst briefing on the results CEO David Thodey said Telstra was aware of the issue of market share and the decline in PSTN revenues.

“The big issue is PSTN decline and it has us concerned. PSTN is a little more volatile than we have previously experienced. We have noticed in the last two months an unexpected decline,” he said. “We have a number of initiatives in the market [to address the issue] and it is very important for us to hold share.”

CFO John Stanhope defended the telco’s spend over $10 billion on its IT transformation against suggestions that shareholders had received no benefit from the initiative.

“We continue to monitor the specific benefits from the transformation… it’s about half and half revenue and cost benefits,” he said. “We’re about $9 million behind on the cost benefits, but on the revenue side we are ahead.

“The single view of customers through the [Siebel] CRM introduction we’re achieving higher strike rates, so revenue has increased, but the downside is the decline in PSTN revenue.”

Telstra split, NBN

Commenting on the separation of Telstra, Thodey said it could be up to another six months before a deal was reached with the Federal Government.

“It is a very complex transaction…there must be 15 major areas we have to consider and you have to have them all aligned before you can come to a conclusion,” he said.

“We all have a desire to get this agreed and get one with life... it is a distraction. If it takes another month or six months I will invest the time. I am not going to be driven into a short term decision. You could miss one thing and it could have a massive impact on the business.”

On the issue of the working with the NBNCo on the roll out of the NBN, Thodey said he could give no update. In its analyst presentation, the telco also said it was now looking to differentiation in order to slow its PSTN revenue decline through the roll out if its Telstra T-Hub and Telstra T-Box products and a boost in customer service.

It is also increasingly looking to wireless, IP and its media business for new revenues.

Major deals for the period included signing on Catholic Education, NSW Education Department, Visy and Bank of Queensland as customers.

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