Telstra Corporation says it is on track for full year revenue and earnings growth as the strong performance of its core business offsets difficulties at its directories business Sensis.
Australia’s largest telco on Friday maintained earnings guidance 2011/12, targeting low single-digit growth in revenue and earnings before interest, tax, depreciation and amortisation (EBITDA).
While mobiles and fixed broadband sales were tracking ahead of expectations so far in the current financial year, the company said Sensis was struggling.
Telstra announced a three-year plan for improving Sensis in March, which involved selling more digital products to arrest a slide in revenue and earnings and cope with the loss of advertisers from its printed directories.
At the time, it forecast mid single-digit declines in revenue for Sensis in 2010/11, and a similar result in the following two financial years.
Figures released by Telstra at a investor briefing on Friday showed the directories business was currently below those targets.
Telstra chief executive David Thodey said the experience at Sensis was no different to what was taking place at “other directories businesses around the world.
“For me, no surprise in terms of what’s happened, expect it’s happened faster,” Mr Thodey said. “It’s speed of change that’s been the issue.”
Asked what he would do if there was an offer to buy the Sensis business, Mr Thodey said the company was committed to the three-year plan.
However, there would be a need to consider any offer to determine if it was good for shareholders.
Telstra said Sensis revenues so far in 2011/12 had been lower than expected and were expected to suffer a percentage decline in the “high teens” over the full year.
Margins would also be compressed, Telstra said, given the “satisfactory but lower than expected take up of digital products” by small-to-medium enterprise (SME) customers.
In other announcements, Telstra said its Sensis, BigPond, IPTV, Foxtel and Trading Post businesses would be consolidated into one division called Telstra Digital Media. It will be run by current TVNZ chief executive Rick Ellis.
Mr Thodey said Telstra was had no intention of moving into the content creation business, instead preferring to partner with media companies such as News Ltd and Fairfax.
The company said it would spend $100 million over four years to improve video streaming capabilities over its network.
On mobile, Telstra chief customer officer Gordon Ballantyne said the telco’s superior network had proved a strong selling point amid “refreshed” postpaid and prepaid plans.
“Our advantage of our superior network means that high-value customers that are looking for a smartphone and the best experience are coming to Telstra,” Mr Ballantyne said.
Telstra closed down five cents, or 1.57 per cent, at $3.14, on a day the broader market fell about 1.8 per cent.
