Telstra Profits Rise As Consumer Continue To Dump Landlines

Revenues rose 1.9 per cent to $26 billion
while profit after tax increased 12.9 per cent to $3.9 billion. In a statement
released today Telstra said that they have added 1.3 million new domestic
retail mobile customers added during the past year.

A breakdown of their new customers revealed
that 287,000 quite owning a landline phone. The breakdown was as followed.

.             1.3
million domestic retail mobile customers, including 452,000 mobile broadband
customers and 423,000 post-paid handheld customers, to a total of 15.1 million;

.             173,000
fixed retail broadband customers, to a total of 2.8 million;

.             238,000
bundled customers, to a total of 1.6 million; and

.             425,000
Hong Kong mobile customers, to a total of 3.9 million.

Telstra’s 4G network build accelerated
during the year, and since launch we have activated more than 2.8 million 4G
devices.

PSTN customers decreased by 287,000 or 3.6
per cent to 7.8 million and PSTN revenue declined by 9.5 per cent.

Chief Executive Officer, David Today said
Telstra remained committed to improving customer service as its number one
strategic priority. “We are continuing to make it easier and quicker for people
to interact with us, with 40 per cent of our customers now doing business with
us online.

“Complaints to the Telecommunications
Industry Ombudsman have fallen for a third consecutive year and we are focused
on implementing key customer service initiatives,” said Mr Thodey.

One of the significant improvements over
the past year included an initiative to reduce bill shock. Customers are now
notified by SMS of every 20 megabytes of data used when travelling overseas so
they can manage their data usage. Another change means that domestically,
customers will receive 50 per cent, 85 per cent and 100 per cent data cap usage
alerts sooner. This gives Telstra customers more control over their data usage
and helps to prevent bill shock.

“Listening to the voice of our customer
ensures we remain focused on improving the level of service our customers
expect. Customers are telling us we are improving, but that we have a long way
to go before more of them become advocates,” said Mr Thodey.

Growth in customer numbers

He added “Our strategy around improving
customer service, as well as focusing on our growth businesses is working. I am
pleased that we have once again delivered on our commitments and met our
guidance, at the same time as continuing to simplify our business,” said Mr
Thodey.

Mr Thodey said Telstra continued to lead in
mobile growth with total domestic retail mobile customers increasing to 15.1
million and mobile revenue rising by six per cent to $9.2 billion.

“We have been able to deliver the third
consecutive year of significant customer growth as a result of our focus on
improving customer service as well as continued investment in the network.

“We know our customers value extensive
coverage, fewer drop outs on calls and reliable mobile data speeds and we
invested $1.2 billion in our mobile network during the year to deliver on this.
This investment includes expanding the reach of our 4G network which now covers
66 per cent of the population and is on target to reach 85 per cent by the end
of the year,” said Mr Thodey .

Telstra continued to build momentum in its
Network Applications and Services (NAS) portfolio. NAS revenue increased by
17.7 per cent for the year and included the commencement of a $1.1 billion six
year contract with the Department of Defence as well as international
agreements with Jetstar and Fitness First.

“Part of the NAS growth strategy is to
expand into international markets, particularly in the Asian region and as we
announced in July, there are discussions underway regarding the establishment
of delivery centres in conjunction with industry partners located in India.
This is important for us as we leverage our Asian network assets to deliver NAS
service offerings in that region,” said Mr Thodey.

Key Financial Results

The reported results for the 12 months to
June 2013 are:

.             Total
income increased by 1.9 per cent or $477 million to $25,980 million;

.             EBITDA
increased by 3.9 per cent or $395 million to $10,629 million;

.             Net
profit after tax increased by 12.9 per cent or $441 million to $3,865 million;

.             Earnings
per share increased by 11.6 per cent to 30.7 cents, bringing the dividend
payout ratio to 91 per cent;

.             Capex
to sales ratio of 14.9 per cent, with capital expenditure of $3,792 million;
and

.             Free
cash flow decreased by 3.3 per cent or $173 million to $5,024 million.

Free cash flow included increased working
capital to support business growth, cash proceeds of $669 million from the sale
of TelstraClear and payments of $821 million for spectrum licences.

On a guidance basis* results for the
financial year were:

.             Total
income increased by 3.3 per cent;

.             EBITDA
increased by 4.8 per cent; and

.             Free
cash flow of $5,176 million.

Telstra expects growth to continue in
financial year 2014 and forecasts low single digit total income and EBITDA
growth, with free cash flow between $4.6 billion and $5.1 billion. Telstra
expects capital expenditure to be around 15 per cent of sales as it continues
to build out its 4G mobile network.