Telstra yesterday reaffirmed its 2010 full financial year guidance of low, single-digit revenue growth.
But that was the least important of the views on the next few months that shareholders and others wanted to hear at the company’s trading update.
The talks with the government on splitting (or structural separation), the value of the assets to be split and what was in it for shareholders were all far more pressing topics.
And ones avoided by CEO David Thodey.
Mr Thodey also said his strategy would not lead to a fundamental change in Telstra’s direction, but recent investments in technology upgrades would be used to improve customer service, expand into developing and adjacent businesses, and offer online customher applications.
Mr Thodey reiterated financial guidance for 2009/10 that "the company would achieve free cash flow of $6 billion, low single digit growth in revenue, EBITDA and EBIT, and maintain its EBITDA margin, but noted that the appreciation of the Australian dollar had created pressure on revenue earned from overseas subsidiaries
Telstra said it would and maintain its EBITDA margin, but said the appreciation of the Australian dollar had created pressure on revenue earned from overseas subsidiaries.
No comment was made on the regulatory issues currently facing the company.
Mr Thodey did however say shareholders would have a say.
"If the board proposes a substantial change to the nature or scale of Telstra’s business in connection with the NBN, subject to the required regulatory approvals, the board intends to seek shareholder approval. If there is any significant change to this company, we will be coming back to shareholders," he said.
“We are under no illusion about the challenges this company faces,” Thodey said. “We have shareholders at the forefront of our mind with everything we do. Can I promise you a deal will be done, no I can’t promise you. I do think there is a pathway to a deal.”
Telstra is in talks with the Federal government, with options ranging from creating a new company for the fixed-line business to shifting customers to the government’s proposed broadband network.
Telstra wants more details on the planned fibre platform before deciding whether to swap assets for equity in the project.
Telstra shares added 5 cents yesterday to $3.29, which wasn’t a bad performance given the volatile trading and 1.4% drop in the market.
It is in fact trading around the level it was when the Government announced its structural separation plans in September.
In his statement Mr Thodey said the company’s four year-long IT transformation had largely been completed, at a cost of about $12 billion.
"The company also confirmed that its four year-long transformation has largely been completed, giving Telstra world-class IT systems, platforms and infrastructure – like the Next G and Next IP networks – that will benefit the company, customers and the nation for many years to come," he said.
"More than 10 million customers and 20 million services have been transferred to new platforms, which will make it easier, simpler and faster for customers to make enquiries, order new products or change their services.
"The transformation has been completed for $12 billion (within two percent of budget), already delivered $5 billion in incremental revenue compared to consensus forecasts, and would deliver many more benefits in future."
"The company requires continuity and stability in the current environment," he said.
"We must focus on our core business and our customers, this is where we create value for shareholders.
"At its simplest, the next stage in Telstra’s long-term strategy is to focus on satisfying customers, invest in new capabilities, and drive growth in new businesses.
"This will further differentiate Telstra from the competition, improving our position in the retail market irrespective of regulatory settings and the national broadband Network, and ultimately deliver shareholder value."
The IT upgrade would allow Telstra to improve customer service and move into adjacent markets such as IT storage and web hosting for business and government.
It would also seek to add value and services to its fixed-line telephony offerings, such as touchscreen home phones that combine phone, internet and media player services.
Mr Thodey said the Sensis and Telstra Media businesses remain core assets and are performing well. That’s despite closing the newspaper edition of The Trading Post and shifting to an all online business.
The Trading Post was in the Sensis business unit and Telstra [paid more than $600 million for it.
"Mr Thodey also confirmed that Sensis and Telstra Media remain core assets and are performing well, and that Telstra would further develop its new media businesses in China and selectively invest around its Asian businesses," the Telstra statement said.
