TELSTRA (TLS) rose today after upgrading its earnings guidance for the year as its transformation strategy continues to deliver strong results. The earnings upgrade was announced in conjunction with the company's six-hour investor update, held in Sydney today.
Telstra CEO Sol Trujillo said the company's 2008 full year earnings before interest and tax (EBIT) forecast had increased by two percentage points to between 5 and 7%, aided by a $100 million distribution from its 50% owned pay-TV unit FOXTEL.
Australia's largest telco said its long-term objectives for both revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) growth to 2010 had been increased to a range of 2.5% to 3%, up from its previous forecast of 2%-2.5%.
"Telstra is winning on the front line," said Mr Trujillo.
"We are earning new revenues as NextG mobile broadband changes the way customers use their mobiles; we are winning market share and revenue-per-user in broadband; and we are bucking the worldwide decline in traditional products."
Telstra is now two years into a five-year overhaul aimed at cutting costs, lost margins and reducing dependence on shrinking revenue from fixed-line phones.
Mr Trujillo also said that Telstra had beaten its own schedule to switch-on a new IT system by two months.
The system, called ‘IT release one', was switched on last weekend and aims to make it easier for customers to do business with Telstra.
A second wave of IT improvements are to be released at the end of 2008.
"Consumers are recognising we offer better products, innovation, service and value," said CEO Trujillo.
"Because of that complete experience, consumers are choosing Telstra over the competition, and they are doing it in growing numbers."
Mr Trujillo also said that because many large operational changes are now in place, Telstra is reducing the capital spend on its transformation.
"The major expenses of the transformation including the NextG and Next IP networks are largely behind us, and our capital expenditure to sales ratio will decline to 10 to 12 per cent by 2010,'' he said.
"Two years into our transformation, consumers have restored Telstra's position as market leader."
Almost 61 million Telstra shares changed hands today. The current daily volume is 37 million.
Telstra rose by 2 cents to close at $4.70.
