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Strong Performance Continues for Telstra; Telstra Announces
Half Yearly Financial Results
BUSINESS WIRE
SAN FRANCISCO--(BUSINESS
WIRE)--March 11, 1999--Telstra today
announced its results for the six months ended
Dec. 31, 1998, declaring a profit after tax and
minorities (before abnormals) of A$1,810 million
(US$1,217 million).
This is a 16.8 percent increase on the previous corresponding period.
Earnings before interest, tax and abnormals are up 12.2 percent to A$3,027
million (US$2,036 million), reflecting continued revenue growth and cost
containment.
Total revenue increased 6.2 percent to A$9,239 million (US$6,213 million),
with strong growth in mobiles, data and Internet-related products.
Operating expenses (before depreciation, amortisation, interest and abnormals)
were held to a 3.3 percent increase, at A$4,973 million (US$3,345 million).
Total expenses (before interest and abnormals) were up 3.4 percent to
A$6,188 million (US$4,162 million). However, labor expense continued to
reduce mainly due to lower staff numbers, falling by 6.2 percent to A$1,764
million (US$1,186 million).
The Telstra Superannuation Scheme (TSS) is currently in surplus. From Dec.
1, 1998, Telstra ceased employer contributions to the TSS and on a full year
basis expects this will result in a reduction in labor expense of around A$250
million (US$168 million) (before tax). The period over which this
superannuation holiday will continue will depend on a number of factors
including current discussions with the Commonwealth regarding the
repatriation of a surplus from the Commonwealth fund to the TSS.
Earnings per share for the half year were 14.1 cents.
Telstra's Directors have declared a fully-franked interim dividend of 7 cents
per share -- a total of A$901 million (US$606 million). It remains the intention
of the Directors to pay total dividends equivalent to 60 percent of operating
profit for the full financial year. The interim dividend has been constrained to
50 percent payout ratio in order for it to be fully franked.
This dividend is payable on April 30, 1999. Shares begin trading ex-dividend on
March 22, 1999, with the record date being March 26, 1999.
Capital expenditure and investments increased 13.3 percent to A$1,905 million
(US$1,281 million). Despite this, free cash flow grew strongly -- by 49 percent
-- to nearly A$1,384 million (US$931 million), reflecting particularly strong
operating cash flow growth of 26.5 percent.
Speaking at the media conference, Telstra's Chairman, David Hoare, said,
"The Board acknowledges with appreciation the substantial progress and
achievements of the company made under the direction of Mr. Frank Blount in
a time of unprecedented change. His leadership provides a solid platform for
this result."
Hoare also said Telstra management and the Board were committed to the full
privatization of the company because it was convinced it would allow the
company to act more commercially.
"However it is an issue for our two-thirds owner, the Commonwealth, and we
look forward to the resolution of the debate later this year so that we can
move further forward to confront the challenges of emerging global markets,"
he said.
Commenting on the results, Telstra's Chief Executive Officer, Dr. Ziggy
Switkowski, said: "This is the continuation of a strong performance by Telstra.
It is the scorecard of a company on track and well positioned for the emerging
market. Telstra has also continued its focus and commitment to meeting
customer service standards.
"Telstra's strong earnings growth is continuing. Revenue is up. Expenses have
been contained. Despite increases in capital spending and investments, the
company has strong free cash flow," he said.
The results show continued strong growth from non-traditional product areas
such as mobiles, fixed to mobiles, data, Internet and other value added
products.
Data and text services revenues increased 12.2 percent, in line with the
continued large increase in demand for data products and bandwidth. This was
principally driven by strong demand for computer networking and
Internet-related products. Integrated Services (primarily ISDN) exhibited
revenue growth of 21 percent over the previous corresponding half year.
Mobiles revenue grew strongly -- up 17 percent to A$1,239 (US$833 million)
for the half year. With the analogue network closing over the next 18 months,
and customers migrating from it, analogue revenues reduced significantly,
while digital revenues grew by almost 50 percent.
Traditional telephony product revenues remained flat as a whole, in line with
the trend of recent years. There were solid increases in basic access -- up 4.9
percent to A$926 million (US$623 million) -- and local calls -- up 5.5 percent
to A$1,376 million (US$925 million) -- but these were offset by a reduction in
long distance revenues, with STD down by less than 2 percent and
International down by 14.9 percent.
"Simplifying Telstra's pricing structure, including the introduction of Easy Half
Hours, which enable overseas callers to pay a simple fixed charge for each
half hour block, have made customers the winners," Dr. Switkowski said.
The solid increase in basic access and local call revenues is evidence of the
results of Telstra's investment to digitalize the network in recent years. This
investment has resulted in a range of value added services being offered by
Telstra, and greater use of the network.
"Key decisions of recent years -- the modernization of our network, which is
now for all intents and purposes complete; our ongoing value-added service
and product offerings as a result; our move into text, data and Internet-related
services -- and the continuing rigor we are bringing to our costs, are paying
off," Dr. Switkowski said.
Telstra had launched 45 new products and 32 service enhancements to the
market in the half year some of which were new data related products
including easymail(TM), and value added services such as Easycall(R) Call
Return and the Single Bill combining customers' home, business and mobiles
services into one easy to understand bill.
Commenting on the challenges of regulation, Dr. Switkowski said the company
had an array of regulatory issues currently before it, but he was pleased to
report that that aspect of the regulatory environment which encourages
commercial negotiation between carriers, before disputes are referred to the
regulator, was working effectively.
Telstra had to date reached agreements with a number of carriers in relation
to a wide range of areas, including PSTN, mobiles, leased transmission, resale
and Internet.
He said the company had a number of operational highlights during the period,
some of which were: -- Progressing the selection of key partners and suppliers
for
Telstra's Data Mode of Operation initiative to develop the
network architecture, systems and processes to support the new
data paradigm.
-- The announcement to build the new national mobile network, based
on Code Division Multiple Access (CDMA) technology, to replace
the old analogue (AMPS) network.
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