Australia's Telstra shares plunge 10% on profit fall

Telstra said its 3.88 billion Australian dollars (3.49 billion US) net profit would slide again by a "high single-digit percentage" in the coming financial year as the fixed-line market falls and mobile competition heats up.

"(Financial year) 2010 was undoubtedly a challenging year as we managed intense competition and an accelerating shift of voice and data to our mobile networks," a company statement said.

It added that "2011 will be a transition year as we invest to prepare the company to compete in the future".

Shares in the former state monopoly closed 9.54% down at $2.94, in a broadly lower market.

"The company disappointed with its 2011 outlook, suggesting revenues would be flat and earnings would be lower in the current financial year," said IG Markets analyst Cameron Peacock.

Telstra signed an 11 billion Australian dollar agreement in June to take part in the government's National Broadband Network, which aims to wire more than 90% of homes for high-speed Internet.

But it warned there was "no guarantee" the deal would go ahead.

The network is not supported by the opposition ahead of knife-edge national elections on August 21.

"While it is an important milestone, a very significant amount of work must still be done on many complex issues before we can take a final completed agreement to shareholders," it said.

"As such, there is no guarantee a final agreement will be reached."

Telstra's fixed-line revenues fell 8.0% to $5.83 billion, while revenues from mobile services rose 5.9% to 6.46 billion.

The company said it added 447 000 new mobile subscribers in the year, while more than 200 000 people cancelled their fixed lines and businesses axed the equivalent of about 326 000 lines.

Around 12% of households were estimated to be mobile-only, up from eight percent a year earlier.

"Today the greatest asset that Telstra has is our customer base and we have been losing too many customers," said Telstra chief David Thodey.

"I am not going to allow it to continue."

Wireless broadband uptake exceeded both mobile data and fixed broadband services, up 34.1% to $787 million.

Telstra said it faced "tough" conditions in the Hong Kong mobile market, where its subsidiary CSL World saw revenues decline 6.7% and suffered a $168 million impairment charge related to the weaker outlook.

The company said it had managed to reduce labour costs by 10.3%, with 12 192 full-time jobs axed since June 2005.

Its shares slumped more than seven percent to $3.01 following the result, which was in line with expectations.

The company announced a dividend of 14 cents per share.

"Telstra has indicated that it's got potential problems with its infrastructure moving forward and I think it's a tough environment for them to be in at the moment," said CMC Markets analyst David Taylor.

Independent analyst Roger Montgomery said Telstra had consistently failed to perform.

"(Telstra) has had virtually no growth in profit in the past decade," he said.

Source: AFP