Telstra CEO: 2H Rev Growth To Slow Across Company
June 12, 2001
Dow Jones Newswires
SYDNEY -- The Chief Executive of Australia's Telstra Corp. (TLS), Ziggy Switkowski, said Tuesday revenue growth has slowed across all areas of the company's businesses so far in the fiscal second half ending June 30.
The company, which is 50.1% controlled by the Australian government, warned the market earlier Tuesday that revenue growth was slowing in the fiscal second half more than the company had previously forecast.
Switkowski said growth in the Australian telecommunications industry is slowing along with the nation's economy, which affects Telstra more than most other telecommunications companies because it is the dominant domestic player.
Speaking on a conference call with journalists, Switkowski said he was "cautiously optimistic" about the next 12 to 18 months but noted revenue growth in May was softer than he expected, which indicates Telstra's revenue growth for the full fiscal year will slow.
At 0330 GMT, Telstra was down 49 cents, or 7.3%, at A$6.22, and was the heaviest traded stock on the market with almost 50 million shares changing hands. Its 10-day share trade average is 18.4 million shares.
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"The first half revenue growth was about 5%, the second half revenue growth appears to be closer to 1%, and given that Telstra is three quarters of the industry this suggests the growth trajectory of the industry as a whole is going through a phase," Switkowski said.
"...I think it is only a pause of trajectory prior to resuming its traditionally high levels of growth and increasing shares of gross domestic product as we move toward the end of this year," he added.
In the fiscal first half to the end of December, revenue grew 5% and earnings before interest and tax, or EBIT, grew 10.4%, but results to date indicate second half revenue growth around 1% and flat earnings before interest and tax from a year ago.
Switkowski said the company is experiencing "lower activity" across most of its product ranges but that Telstra is still on track with its cost-cutting program.
He previously forecast the company would produce savings of A$550 million by the end of the current fiscal year, and noted it will make "substantially more" than the A$100 million in cost reductions already earmarked for fiscal 2001-2002.
The difference between 1% and 5% revenue growth in the half year on a half-year revenue base of about A$10 billion is close to A$400 million, Switkowski said.
Lower activity, lower prices, market share shifts and reduced yields in some products were mostly to blame for reduced revenue growth, he added.
The revenue growth projections are for core operations and exclude the impact of consolidation and other accounting effects from Telstra's three Asian joint ventures with Hong Kong's Pacific Century CyberWorks Ltd. (H.PCW) and other equity investments.
The fiscal second half also will be marred by a A$36 million bad debt related to the financial difficulties of One.Tel Ltd. (A.OTL), a small telecommunications concern that is in voluntary administration, Switkowski said.
Telstra has attracted One.Tel customers onto its mobile phone network, but the former One.Tel customer numbers are small in the broader context of Telstra's existing five million-plus mobile customers, Switkowski said.
One.Tel has around 220,000 mobile phone customers, who are expected to migrate to other networks, including that of Telstra.
Telstra is in the bidding for Singapore's second largest telecommunications company MobileOne Pte. Ltd., but Switkowski didn't shed much light on the subject when questioned.
"Let me not give you any confirmation about what is happening in Singapore but let me absolutely reassure you that the results in the (second) half don't change our priorities in general as a company and, in particular, the Asian marketplace," he said.
-By Graham Morgan, Dow Jones Newswires;
61-2-8235-2962; graham.morgan@dowjones.com
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