Australia's number two telecommunications company Optus says revenue growth in the current financial year is expected to moderate and earnings are to decline slightly.

Optus reported an 8.1 percent decline in net profit to AU$150 million for the second quarter of 2005/06, down from AU$163 million in the previous year.

"While revenue growth in the year ending 31 March 2006 is expected to moderate, Optus targets to exceed overall market growth, consistent with its medium term objective," Optus' parent company Singtel said in a statement.

"For the current financial year, Optus expects its operational earnings before interest, tax, depreciation and amortisation (EBITDA) margin, while exceeding 28 percent, to decline compared to a year ago."

Optus said its EBITDA margin declined to 28.6 percent during the second quarter of 2005/06.

Operating revenue in the quarter increased marginally to AU$1.76 billion, from to AU$1.75 billion in the previous year.

A combination of standing firm in intensely competitive markets and investing to capture future growth opportunities has slowed revenue growth and profitability for Optus this quarter," the company said.

Optus said operating expenses grew 3.8 percent to AU$1.264 billion, up from AU$1.217 billion in the three months to September 2004/05.

Operating cash was stable, with cash capital expenditure up 25 percent to AU$229 million in the second quarter, compared to the corresponding period a year ago. Free cash flow declined 17 per cent to AU$242 million.

"The capital expenditure increase was mainly due to the third generation (3G) mobile network as Optus prepares for its 3G launch in Sydney and Melbourne and the planned Unbundled Local Loop (ULL) rollout," Optus said.

The Optus mobile division -- which accounts for around 70 percent of the telco's EBITDA -- reported revenue growth of 2.6 percent in the second quarter to AU$979 million.

Mobile operational EBITDA declined 4.2 percent to AU$359 million in 2005/06 from AU$375 million a year ago.

Optus estimates its mobile market share declined three percentage points over the 12 month period to 32 percent.

Optus chief executive Paul O'Sullivan said the results reflected a highly aggressive and competitive market but said the company was taking decisive actions to respond.

"Intense competition across all our businesses in Australia continues, with retail prices declining more rapidly than traffic expenses... To mitigate this margin pressure, we have taken steps to reduce costs and create savings opportunities," said O'Sullivan.

These initiatives include selective outsourcing of the company's call centre and finance operations, consolidating its IT data centres and reducing the number of management layers.

"We continue to explore further opportunities for cost savings," he said.

Optus' mobile division contributed 56 percent of operating revenue and 71 percent of operational EBITDA, up two percentage points respectively from a year ago.

The division continues to focus on three strategies to drive growth including growing market share in the business mobile market, stimulating data revenues and leveraging traditional strengths in the consumer segment, the company said.

The first two initiatives have seen positive outcomes, with Optus business mobile growing its market share with revenue up 7.2 percent compared to the same quarter last year and data revenue now representing 18 percent of average revenue per user (ARPU).

In the quarter, net mobile customer adds were 59,000 and the customer base increased 2.8 percent to 6.09 million from a year ago.

"While competition in the consumer market has been intense -- with capped plans and lower termination rates impacting our EBITDA margins -- we continue to focus on protecting our market position... Postpaid churn for Optus Mobile was stable at 1.5 percent and total spending on subscriber acquisition costs was broadly in line with the last corresponding quarter," said O'Sullivan.

Postpaid ARPU declined by 3.1 percent as a result of a higher penetration of the customer base using capped plans as well as the lower termination rates.

Caps now account for 10 percent of Optus total postpaid mobile base.

Optus said its fierce price-based competition was reflected in its 4.1 percent decline in revenue for the combined business and wholesale divisions.

"Despite the intense competition in the business division, revenue remained stable... Wholesale revenue, however, declined 13 percent after the completion of some one-off low margin transit business in the second quarter of last financial year," the company said.

Optus reported a net profit of AU$300 million for the first half of 2005/06, down 4.6 percent on the AU$315 million in the previous corresponding period.