Telstra fails to impress with gloomy outlook
By Total Telecom staff
13 July 2001
Australian government-controlled operator Telstra said Friday that it would meet its reduced forecasts for this year and that its Asian joint ventures with PCCW were performing as expected, but its attempt to restore investor confidence following a devastating profit warning last month failed, Reuters reported.
In a statement to the Australian Stock Exchange, the company confirmed it expected to meet its reduced targets in full year results - a 3.4% increase in revenue on the previous year, a 2% increase in expenses and a 5.5% growth in EBIT (earnings before interest and tax), Reuters reported.
Telstra said in a media briefing that the second half of 2000/01 had shown revenue growth of just under 2% and EBIT growth of 1%, Reuters reported, and that it had achieved its target of A$550 million in cost cuts for the year.
The news agency said Telstra's attempt at reassurance did little to restore confidence battered by its 12 June warning that EBIT growth for the year would be half the original double-digit target. That announcement led to a sustained sell-off in Telstra, dragging its shares down by 26% to a three-year low of A$4.96, Reuters said. The company's latest statement did nothing to reverse that trend, as Telstra's shares fell by 2.6% following the news to close at A$5.26, the news agency reported.
Chief executive Ziggy Switkowski admitted to reporters that the earlier dramatic drop in value had left him stunned. "I was a bit unsettled by what I saw to be the reaction to the profit warning in June," Reuters quoted him as saying at the Friday briefing, an impromptu affair held just a week after the company cancelled a briefing in Hong Kong for institutions.
The chief executive defended Telstra's position by insisting that no executives since December had ever confirmed the earlier 11% EBIT growth target would be achieved. "It was never intended, and I do not believe it occurred, that we somehow or other over-stimulated expectations," he told Reuters.
The news agency reported that analysts were divided on the success of the presentation, with their impressions ranging from "bizarre" and "pretty disappointing" to "successful" in cutting out speculation in the market.
Switkowski failed to satisfy analysts looking for long-term forecasts. He said the company planned to cut costs beyond the earlier target of A$650 million by June 2002 to offset falling revenue growth, but would not divulge the new target, Reuters reported.
"No more forward looking forecasts. No more guarantees," the news agency quoted him as saying.
Joint ventures on track
Telstra said its joint ventures with PCCW, announced in 2000 and sealed in February, were on track, Reuters reported.
Reach, the wholesale business, was largely achieving its targets and would report an EBITDA (earnings before interest, tax, depreciation and amortization) of US$400-US$500 million for the calendar year 2001, Telstra said.
CSL, the Hong Kong operating unit of the regional wireless company, was expected to report EBITDA of US$150-US$175 million, Reuters reported.
"We are very pleased with the platform we have built in Asia and we are well placed to build on that," Switkowski told Reuters. He also promised that Telstra would not make any further financially questionable acquisitions in Asia, admitting it had bought into the Hong Kong wireless business at the top end of the market for strategic reasons.
Fails to sell engineering unit
Telstra also said on Friday it had taken its Network Design and Construction (NDC) unit off the market after failing to agree on a price with potential buyers.
"Telstra considered all purchase offers but none measured up to our strategic objectives," the company said in a statement to the Australian Stock Exchange.
The company has been trying to sell NDC, which has a turnover of about A$1 billion and 6,000 workers, for more than a year as part of its effort to cut costs.
One of NDC's potential buyers, contractor and builder Leighton Holdings, told Reuters it had been unable to agree on terms and conditions with Telstra for the "commercial and strategic direction" of the engineering unit.
NDC will for the moment continue to operate as an independent design and construction business servicing Telstra and other carriers, Reuters reported, but Telstra confirmed that it did not wish to participate in the business in the long term. |
