Telstra 1st-Half Profit Surges on Cost Cuts: Earnings Outlook
quote.bloomberg.com
By Mathew Carr
Melbourne, March 2 (Bloomberg) -- Telstra Corp., Australia's largest telecommunications carrier, is expected to report a 33 percent increase in first-half earnings after cutting its costs and gaining from a one-time employee pension accounting change.
Expected Earnings:
Melbourne-based Telstra, which has lost market share in Australia as new rivals compete for its customers, is expected to report net earnings of A$2.8 billion ($1.5 billion) for the six months to Dec. 31, according to the average of four analysts surveyed by Bloomberg News. That compares with A$2.1 billion in the same period last year. Forecasts ranged from A$2.7 billion to A$3 billion.
Time:
The telecommunications company will announce its results in Melbourne on March 7 at about 12 p.m.
Behind the Numbers:
Telstra, a former monopoly which remains 50.1 percent owned by the Australian government, has faced falling prices in its long- distance and wireless units as a result of competition from rivals such as Telecom Corp. of New Zealand, Cable & Wireless Optus Ltd. and Vodafone Group Plc.
Offsetting falling market share in those units is increasing revenue from Internet traffic and a growing overall wireless market.
Its result will include a A$478 million gain from a reduction in future employee pension payments, forecast in the company's 2000 annual report. There will also be one-time gains from the sale of investments, including some of its stake in Computershare Ltd., offset by write downs on other investments.
In March last year, Telstra said it would reduce its workforce by 10,000, including 220 executive positions, during the following two years, helping to reduce expenses by A$650 million.
Analysts are hoping Telstra delivers on its promise to generate more than 10 percent growth in earnings before interest and tax, or ``normalized'' earnings, to A$3.5 billion.
What the Experts Say:
Telstra has two key challenges, said Andrew Hines, an analyst with ABN Amro Bank NV in Melbourne. ``It's a combination of increased sales and reduced costs,'' Hines said, adding he expected 5 percent revenue growth from Telstra. ``If they deliver 10 percent growth in underlying profit, that's a credible performance in this market.''
Market Performance:
The company's shares have fallen 14 percent in the past year, compared with a 36 percent decrease in the Australian Stock Exchange's Telecommunications Index. The ASX All Ordinaries Index rose 2 percent in the same time.
Previous Market Reaction:
On March 8 last year, Telstra's stock fell as much as 6.4 percent, or 56 cents, to A$8.15 after it announced its first-half result. |
