Customer habits dampen Telstra profit

Telstra's first half profit has dropped as the telco faced pricing challenges and changes in the services its customers used.

Telstra posted a 3.3 per cent drop in first half profit for the six months to 31 December with $1.853 billion, down $63 million on the $1.916 billion posted in the previous corresponding period.

Chief executive David Thodey acknowledged that Telstra faced challenges from strong price competition, the acceleration of homes moving to wireless at the expense of fixed lines and a stronger Australian dollar.

"Overall, we have seen a decline in adjusted revenues in the first half despite good performances in mobile data, wireless broadband and IP data," Thodey said in a statement.

"This reflects challenging market conditions due to changing calling behaviours and stronger price competition."

Some improvement is expected in some of those areas in the second half, Telstra said, with an improving economic backdrop.

"Despite these challenges, we expect a modest improvement in the trends in the second half of fiscal 2010 with our new offerings, new pricing plans and new revenues from major contract wins," he said.

Telstra has downgraded some of its full year guidance, now forecasting a low single digit decline in sales revenue compared to the previous year.

Revenue was $12.342 billion, a drop of 2.9 per cent on the $12.71 billion in the previous corresponding period. Telstra declared an interim dividend of 14 cents per share, identical to that issued for the corresponding period last year.

As forecast, sales revenue declined 2.5 per cent on the previous corresponding period to $12.323 billion.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also fell, down 0.3 per cent to $5.317 billion.

In another areas which is likely to effect the telco's future revenues, Telstra's ongoing negotiations with the government on the National Broadband Network (NBN) remain complex, Thodey said.

"We remain engaged in constructive talks with the government and NBN Co," Thodey said.

"We remain committed to try to find a mutually acceptable outcome, but the path ahead remains immensely complex.

"Throughout these talks, the best interests of our investors, our employees and our customers have remained paramount and we will continue to keep the market informed when significant developments occur."