By Ross Kelly
SYDNEY--Telstra Corp. (TLS.AU), Australia's biggest
telecommunications company by market value, booked a
better-than-expected 12% rise in annual profit Thursday after it
poached smartphone customers from a glitch-plagued rival.
Sydney-based Telstra, once hampered by the mass exodus of
customers away from its traditional fixed-line network, has been
one of the strongest performers on the Australian share market in
recent years as profits improve and it attracts cautious investors
with steady dividend payouts.
The company's profit for the year through June of 3.81 billion
Australian dollars (US$3.43 billion) beat the A$3.69 billion
average of nine analysts' forecasts compiled by The Wall Street
Journal. It continues a gradual turnaround in performance from
2011, when earnings tumbled 17%, and follows a deep cost-cutting
drive that involved shifting back-office jobs to India and
investing heavily in the company's wireless network.
An improvement in the reach and quality of Telstra's mobile
offering, including the establishment of a 4G network, has
coincided with a rapid deterioration in service quality at Vodafone
Australia, an equal joint venture between Vodafone Group PLC
(VOD.LN) and Hong Kong's Hutchison Whampoa Ltd. (0013.HK).
Vodafone Australia last month confirmed it lost 551,000
customers in the six months to June 30 alone after its network
infrastructure became overstretched. The company is currently in
the early stages of a turnaround strategy it says is designed to
"resolve the impact of network and customer service issues" that
have damaged its brand reputation and performance in the past few
years.
Telstra said Thursday it added 1.3 million mobile customers in
the year through June.
The company, which is worth A$62 billion, has piles of money to
invest.
Last year, it agreed to shut its fixed-line infrastructure
progressively and transfer its customers to the
Australian-government owned NBN Co.--which is rolling out the
country's new high-speed broadband network--in exchange for A$11
billion. The deal, however, strips Telstra of its wholesale
infrastructure monopoly, forcing it to compete harder for retail
customers.
Investors are holding out for Telstra to eventually start
returning some of the A$11 billion broadband windfall in higher
dividend payouts or a share buyback. The company Thursday held its
final dividend steady at 28 cents per share, without providing
guidance for the current financial year.
It forecast "low single-digit" percentage growth in revenue and
operating earnings this fiscal year. Revenue last year grew by 1.9%
and operating earnings, which exclude interest and tax payments,
rose 3.9%.
Write to Ross Kelly at ross.kelly@wsj.com
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