It was O for Optimism day at Telstra’s investor day yesterday.
It’s optimistic about the certainty for its 28c a share dividend to continue (but not quite as optimistic as it seemed at first glance) and it’s optimistic that it will get an NBN deal for its fading fixed line businesses, and it’s optimistic that the latest transformation plan has started showing results.
And the market at first picked up Telstra’s optimism, sending the shares gently higher to $2.76, from $2.70, and then as gently down to $2.68, as the optimism faded.
Yesterday was the chance for the Telco’s management to detail and sell its $1 billion plan to grow market share and streamline the company over the next three years.
Judging by the level of scepticism, it’s going to be a long haul for the company and its management.
So there was a flurry of announcements and briefings.
The 28c a share dividend was the big issue for investors.
CEO, David Thodey said the company could comfortably continue to pay an annual dividend at the current level of 28 cents.
"Telstra’s Board has always been acutely aware of the importance of dividends to shareholders.
"Because of our strong free cash flow, Telstra could comfortably fund a 28-cent share dividend in 2010/11," Mr Thodey said.
"The purpose of our strategy in 2010/11 is to improve the company’s long-term EBITDA and cash flow, which will underpin our ability to fund dividends in the future."
There’s just a tiny non-committal tone on the dividend that is a bit of a concern, the use of the world "could".
It would have been easy for the company and the CEO just to say,’ 28c a share OK for 2011 year, we can afford it’.
And yet there’s the qualifier "could comfortably fund".
Why not "will" fund?
After all there was that three year commitment to a 28c a share annual dividend that underpinned the final sale of the Government’s stake back in 2006, why not know as the company enters a more testing stage?
Or are the board and management fearful about the company’s finances in the next three years?
So it’s probably no wonder the share price fell after that early rise as shareholders chewed over the wording of the comments on the dividend staying at its current level.
On top of that there was a flurry of figures about how Telstra was doing better on confidence, subscriptions, losing fewer fixed lines since 2007, new phone sales and services and more.
A case of information overload.
Telstra said it was targeting growth opportunities in Australia and Asia from developing new applications and services and moving into areas such as digital media.
"Our long-term growth strategy takes advantage of changes in technology, a growing sales and marketing-led culture and simpler company systems that lower our costs," chief executive David Thodey said.
Telstra said it was optimistic it would complete an $11 billion deal to sell its fixed line assets to the government.
CEO, David Thodey said negotiations with the government are progressing well and the company is optimistic it could achieve a final deal.
The company has seen a sharp slide in earnings and market share over the past few years, which has led to speculation among analysts that its dividend – a key attraction for retail shareholders in particular – would have to be cut.
That remains unresolved after yesterday’s briefings, it seems.
So we will have to wait until the annual meeting on November 19, and then the February, 2011, half year profit statement, for any further guidance on what’s the most pressing issue for small shareholders.
Mr Thodey also revealed more details of the company-wide program it was calling "Project New".
It involves 500 staff members implementing 27 programs to reduce spending on third parties, improve online customer service, improve the productivity of its field workforce, simplify its prices and cut costs, he said.
Under Project New, Telstra is targeting a 6% improvement in customer satisfaction scores and a 30% cut to complaints to the Telecommunications Industry Ombudsman in the 2010-11 financial year.
It wants to maintain its fixed broadband market share and grow its wireless broadband market share over three years.
The program is also aimed at getting 20% of Telstra’s revenue from media, international and network-based services by the end of 2012/13.
Project New forms part of the Telco’s $1 billion investment to be made in the current financial year to turn around its dwindling financial performance.
"This company must change,’’ Mr Thodey told investors. ‘‘It must undergo significant restructuring."
Telstra also repeated the guidance at the August results briefing for 2011 of flat sales and a high single digit decline in earnings before interest, tax, deprecation and amortisation (EBITDA).
Telstra said at that results briefing that it would spend heavily in a bid to arrest its declining market share. It claimed yesterday there were early positive signs.
In the first two months of 2010/11 the company said it had:
Sold 165,000 bundled offers, bringing to 490,000 the total number sold since their introduction nine months ago.
Sold 64,000 T-Hub and T-Box services, bringing to around 100,000 the total number
