Telstra sees Asia as part of focus on key growth areas
Telstra Corp Ltd chief executive Ziggy Switkowski has signalled further investment in Asia by its joint ventures with Hong Kong's Pacific Century Cyberworks.
At a briefing for analysts, Dr Switkowski said a series of Asian investments were ahead of Telstra which could be made without upsetting its balance sheet.
When asked what sort of outlay Telstra would have to make to be able to meet its stated goal of 20-25 per cent of the value of Telstra coming from the Asian joint ventures, Dr Switkowski said sizeable investment was still needed.
Telstra's key Asian joint ventures are with Pacific Century Cyberworks Ltd (PCCW).
Telstra has a 50 per cent interest in internet infrastructure joint venture Reach Ltd, and a 60 per cent interest in Regional Wireless Co, which holds the mobile business CSL.
The telco has said it wants about 20-25 per cent of its value to be its Asian business within five years, and Dr Switkowski said today it was about a third of the way towards the target.
He said that over the next five years, "it is clear there'll be a series of investments ahead of us that we can make and we know we have the capacity to do within our current cashflows, without upsetting the balance sheet".
Reach and CSL would be the platform for Telstra's growth in Asia, he added.
Concerns about Telstra's joint ventures in Asia with Hong Kong based PCCW and negative sentiment towards the telco sector overall, have contributed to further falls in Telstra shares to fresh three year lows this week.
The shares closed nine cents lower at $4.90 today.
However Dr Switkowski said Asia remained a focus for growth for Telstra.
"In terms of the broader Asian aspirations Telstra continues to have a number of alternatives. We don't feel in any way constrained or limited on executing on sensible moves in Asia," he said.
"And I emphasise sensible and strategic alignment (in) wireless, data, internet protocol, operating control, non-dilutive (ventures) in the right geographies," he said.
Dr Switkowski also said that the Asian joint ventures were also well placed for potential growth into the Chinese telecommunications market.
The company had changed its view in the last year regarding the importance of China to the joint ventures.
"China is higher in our thinking than it was a year ago," he said.
He said Telstra was well positioned to play some role in telecommunications growth prompted by Beijing's 2008 Olympic Games.
However, the joint ventures were unlikely to do anything substantive ahead of a China submission to the World Trade Organisation which is due later this year.
Dr Switkowski was looking to address some of the worries about the Asian ventures at the analysts briefing, with input from CSL chief executive Hubert Ng and Reach chief executive Alistair Grieve.
Analysts were told the two Asian joint ventures were meeting forecasts.
Dr Switkowski confirmed CSL's EBITDA for the year to December 31, 2001 was still expected to be in the range of $US150 million - $US175 million.
Reach was also on track for its 2001 calendar year EBITDA target of between $US400-500 million.
Mr Grieve said the Reach business was tracking roughly to the company's operating plan.
With supply in capacity outstripping demand in the region, "we're looking at an environment of falling prices".
However Reach, which currently had the right amount of capacity, was planning for this and would be able to buy more capacity at cheaper rates.
Mr Grieve said that Reach was not overexposed to excessive capital investment in idle plant - network infrastructure and data centres. It also had scale, a resilient network and had customer confidence.
"Reach is not overexposed. Reach is conservatively geared. We do, unlike some operators, have very strong customer base and cash flow."
Dr Switkowski said he has confidence in the joint venture management and the integrity of the Asian strategy.
"The future of Telstra requires us to thoughtfully expand our business offshore especially in Asia, and it will be on the back of these investments and experience we've had in the last year and a half in the formation of the joint ventures," he said.
©AAP 2001
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