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Mobile surge helps Telstra lift first-half profit

8 Feb 2013 THE AGE
BY PETER CAI


TELSTRA has defied weak industry-wide mobile phone growth by adding more than 600,000 mobile customers, positioning the nation's dominant telco for a full-year profit of more than $3.6 billion - its biggest in three years.

But Telstra continues to be frustrated by its play in the media sectors after the telco conceded margins at its Sensis business would continue to come under pressure as sales revenue declined in the digital age.

Telstra shares rose more than 1 per cent on Thursday after the company lifted its first-half profit by almost 9 per cent to $1.6 billion in the six months to December.

Chief executive David Thodey said Telstra was on track to achieve its full-year target of low single-digit percentage growth of income and pre-tax earnings.

The first-half profit rise came on the back of strong growth in customer numbers, with the company adding 607,000 new mobile customers, which helped offset falls in its directories and fixed-line phone businesses.

The latest lift, which came amid intense competition among rivals including Optus and Vodafone, brings the total number of mobile customers to 14.4 million. Mobile revenue grew by 4.6 per cent to $4.6 billion in the six months to December 31, 2011.

"We continue to see our customer growth in key products and services, particularly mobile," Mr Thodey said.

As the mobile market reaches saturation point in Australia, he reiterated the company's focus on customer satisfaction.

"We really have this ambition to change the way everybody talks about Telstra. We have made progress, but we have a long way to go," he said.

Telstra has further cemented its position as the country's leading 4G services provider, having sold more than 1.5 million 4G devices and extending its super-fast network coverage to two-thirds of the country by June this year.

Mr Thodey said he intended to maintain Telstra's "network supremacy both in speed and coverage". Optus and Vodafone are investing heavily in their networks to keep pace. But with faster speeds for now, Telstra has been charging a premium for its services.

The core mobile business performed strongly and achieved a profit margin of 37 per cent, despite a fall in revenue growth. 4G penetration has reached 13 per cent of its post-paid customers and 17 per cent of mobile broadband customers.

The sharemarket liked the result, with shares closing up 6¢, or 1.3 per cent, to $4.64 as investors welcomed the results and the 14¢ fully franked interim dividend. The dividend was in line with management's goal of maintaining a 28¢ dividend for the 2013 fiscal year. While Telstra is widely seen among investors as a yield stock, recent share price gains has seen this yield diminish over the past six months.

Deutsche Bank analyst Vikas Gour noted that the revenue divergence between "good Telstra", which includes mobile and the network application and services divisions, and "bad Telstra", which includes fixed line and Sensis businesses, had become more pronounced since the second half.

Telstra's fixed-line business fell 4 per cent; the surge in demand for fixed broadband was not enough to offset the revenue decline in Telstra's old copper network, which fell 10.8 per cent.

Income from the struggling Yellow Pages Sensis business continued downward, falling 12.5 per cent. However, the growth in its digital revenue rose from 2.5 per cent last year to 11 per cent this year.

Mr Thodey said Sensis will continued to be restructured as it moves "from a print to a digital business".

Telstra received $176 million under the NBN agreements to shut down its copper network in the latest half-year.

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