Worst Telstra result in 9 yrs

Australia’s largest telco reported a 26 per cent fall in annual net profit to $3.

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181 billion, from $4.31 billion in the previous year.

Chief executive Sol Trujillo said Telstra was “taking the tough medicine” as it makes new investments and provisions as part of a three to five year plan to restructure the group and embed long term value for shareholders.

“We are executing our transformation with a sense of urgency, we have momentum, we are showing results, and the results are promising,” he said.

Revenue fell 2.6 per cent to $22.838 billion, although the company still expects that rate of decline to ease over the next four years.

“As foreshadowed in our plan, we expect revenue growth of between two per cent and 2.5 per cent compounded annually between now and 2010,” Telstra said in a statement.

Full year earnings before interest and tax (EBIT) fell 20.7 per cent to $5.497 billion although the decline was at the better end of telco’s guidance.

Mr Trujillo said EBIT is expected to grow between four to six per cent this year although EBIT excluding transformation costs would be flat to down two per cent.

Telstra incurred significant costs of $1.126 billion during the year, relating to redundancies and the restructuring program announced last year, as pressure on its margins increased.

It also pointed to an accelerating decline in its high margin PSTN or fixed line revenue.

PSTN revenue fell 6.7 per cent to $7.478 billion in the year to June 30, 2006.

But mobiles revenue rose by 6.1 per cent to $4.972 billion, broadband revenues grew 64.5 per cent to $1.191 billion and advertising and directories revenue rose 7.9 per cent to $1.711 billion.

“With our next generation networks, we are putting in place the infrastructure to reduce our reliance on our traditional fixed line revenue streams and to grow our mobiles, internet and other next generation revenues while reducing the costs of operations,” Telstra said.

Telstra maintained its final dividend at 14 cents per share, taking the total dividend for the year to 34 cents, from 40 cents in 2004/05.