TELSTRA EXPECTED TO POST YR NET PROFIT OF MORE THAN US$2.1 BLN
8/24/2001 5:12:00 AM
SYDNEY, Aug 24, 2001 (AsiaPulse via COMTEX) -- Telstra Corp Ltd (TLS) is expected to post a full year net profit above $A4.0 billion ($US2.13 billion) next week, with analysts watching for any writedowns or sales of the companay's tech investments.
Analysts surveyed by AAP said they expected a bottom line result of between $A3.73 billion ($US1.99 billion) and $A4.4 billion ($US2.34 billion) for Telstra.
The wide variation was because of different treatments of abnormals, particularly on goodwill.
They are now looking for Telstra to make cost cutting initiatives, in a bid to convince investors that the telco is a growth company.
Telstra's share price has remained under pressure in the lead up to the result on August 29. The shares closed 12 cents firmer at $A4.94 ($US2.63) today.
The shares are up off their yesterday's three-year intraday low of $A4.80 ($US2.56), a level not seen since June 1998 when the stock traded as low as $A4.52 ($US2.41).
Falls have been relating to a number of factors including general telco sector weakness, political concerns and worries about Telstra joint ventures in Asia.
Industry analyst Paul Budde said Telstra's share price will remain under pressure until strong forward initiatives are taken.
"They (Investors) want chief executive Ziggy (Switkowski) to make some bold statements and show leadership," Mr Budde said.
Telstra has already given the market a strong indication of its full year expectations, saying it expects to produce growth in earnings before interest and tax of around 5.5 per cent.
In the year to June 30, 2000 Telstra reported earnings before net interest, abnormals and tax of $A6.551 billion ($US3.49 billion).
Analysts' expectations for the year to June 30, 2001 vary but most say they haven't changed their views in recent weeks. Their revenue expectations for Telstra range in the region of $A18.9 billion ($US10.06 billion) to $A19.25 billion ($US10.25 billion).
At one end of the profit spectrum, UBS Warburg analyst Paul Richardson said he expects a net result of around $A4.4 billion ($US2.34 billion) versus Telstra's $A3.677 billion ($US1.96 billion) net profit in the previous year.
He said excluding the abnormals he is expecting a profit of $A3.94 billion ($US2.1 billion), "down around two per cent on the previous comparable pre-abnormal number".
"The way (the profit) is made up will probably be the key. If they're saying the slow down in revenue was due to a slower economy then we'll be looking for confirmation of that, but in the areas which are more cyclical as opposed to those that have more underlying growth," he said.
Mr Richardson said he will watch Telstra's outlook on capital expenditure and operating costs, and how these will be controlled.
At the other spectrum end, another analyst said he expects a net profit of around $A3.73 billion ($US1.99 billion), with revenues of $A18.9 billion ($US10.06 billion).
Analysts will watch revenues particularly in the corporate and data, and information on any new strategies for the company's mobile business.
They will also focus on any writedowns, particularly on valuations of Telstra's joint ventures in Asia with Hong Kong's Pacific Century Cyberworks Ltd.
Telstra and PCCW hold 60:40 stakes in mobile-based Regional Wireless Co. They also hold 50:50 in Reach Ltd, an internet protocol backbone provider. One analyst said the treatment of goodwill for Reach has impacted analyst forecasts for the profit.
Dr Switkowski has said Telstra will write down the joint ventures, but the writedowns will likely to be offset by profit from the sale of Telstra's global wholesale business into one of the joint ventures and by other positive unusual items.
Analysts said Telstra has been reviewing the technology investments it made during the dot com boom given the lower valuations in the sector. The review takes in stakes in Solution 6 Holdings Ltd, SMS Consulting Group, Keycorp Ltd and US companies Dynergy and Extant Inc.
They are also watching outlook on TelstraSaturn, a New Zealand-based broadband communications joint venture with Austar United Communications Ltd.
(C) 2001 Asia Pulse Pte Ltd
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