Telstra, Australia's largest phone company, reported first-half earnings of almost $1.5 billion, a touch below analyst expectations, as a jump in mobile subscribers was countered by a fall in sales at its Yellow Pages Sensis business.
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Telstra added almost one million new mobile services in the six months ending December 31, which helped contribute to a 22.5 per cent increase in net profit of $1.48 billion, up from $1.2 billion the previous year.
Telstra shares, though, fell as much as 9 cents, or 2.6 per cent, to $3.35 in early trading, as investors eyed the smaller-than-expected profit. The share slide compared with a drop of about 0.4 per cent for the overall market.
While fixed-line telephone revenue extended its decline of 9 per cent, domestic mobile revenue increased almost 11 per cent.
Total revenue for the half was $12.4 billion, up 1.1 per cent on the same time last year, missing analysts' estimates of 1.3 per cent growth. Still, chief executive David Thodey said it was "one of the best years for customer growth".
However revenue from the struggling Sensis business was down 24 per cent to $528 million because of unspecified problems implementing a new digital strategy and fewer businesses taking out advertisements in the Yellow Pages.
Management confirmed guidance of low single-digit growth for the full financial year and a 14 cent dividend for the half.
There was no mention of a potential share buy back from the deal with NBN Co because Telstra is still waiting for a key regulatory document to be approved - the so-called "structural separation undertaking".
Analyst and media briefings will be held this morning.
Profit falls short
Telstra, which last June inked an $11 billion deal with the Australian government to hand over its fixed line assets to form the basis of a $38 billion National Broadband Network, had been expected by analysts to register a profit of about $1.512 billion for the half, according to a Reuters survey.
''Results for the first half of the year were in line with our expectations despite the difficult macro economic backdrop,'' Telstra said in a statement.
Earnings rose 3.7 per cent before interest, tax, depreciation and amortisation (EBITDA) to $4.75 billion, slightly below analyst forecasts for a 4.4 per cent rise.
Telstra said earnings guidance for low single-digit revenue and EBITDA growth for the full 2011/12 year, as well as a 28-cent fully franked dividend, was unchanged.
''Results for the first half of the year were in line with our expectations despite the difficult macro economic backdrop,'' Telstra said in a statement.
Telstra said earnings guidance for low single digit revenue and EBITDA growth for the full 2011/12 year, as well as a 28-cent fully franked dividend, was unchanged.
Mobile gains
Telstra said it added 958,000 mobile customers in Australia during the half, signed up 106,000 fixed-broadband customers and 166,000 T-Box and T-Hub services.
''Last year we recorded one of our best years for customer growth,'' Telstra's Mr Thodey said in a statement.
''This momentum has continued into the first half of fiscal 2012.''
The fixed-line business, however, continued to struggle, shedding 136,000 customers and a 9 per cent decline in revenue to $2.49 billion.
Telstra reaffirmed its intention to consider a broader capital management strategy after implementation of its national broadband network agreements and the Australian Competition and Consumer Commission's (ACCC) approval of its structural separation undertaking.
The company said it was close to finalising the NBN transaction. During a conference call, the company said its plans for capital management would not be swayed by any change of government in Australia or changes to political policies.
Analysts expect Telstra will use some of its $11 billion payment from the government as part of the NBN deal to buy back some of its shares.
Sensis sags
Last year, Telstra said Sensis was underperforming and announced a three-year plan to arrest the slide in revenue and earnings and to cope with the loss of advertisers from its printed directories.
In November, Telstra said Sensis revenues so far in 2011/12 had been lower than anticipated and the business was expected to suffer a percentage decline in the high teens over the full year, with margins compressed.
Sensis, as well as Telstra's Bigpond, IPTV, Foxtel and Trading Post, have been consolidated into one division called Telstra Digital Media.
Telstra today said Sensis's first-half result was impacted by the upfront costs of the restructuring and an acceleration in the decline of its Yellow Pages print revenue as the market evolved more rapidly than expected.
''Since launching the strategy in March 2011, it has made progress in restructuring its operations to adapt to the challenges of the directories market,'' Telstra said.
Telstra said Sensis's first-half results were also impacted by the movement of the recognition of the Perth Yellow Pages book to the second half.
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