Telstra Not Having a G'Day
Telstra revised its earnings guidance downwards on Monday, blaming the Australian Competition and Consumer Commission (ACCC) for cutting access charges for local loop unbundling from A$22 (US$16.69) to A$17.70 (US$13.43) per month. (See Telstra Revises Guidance.)
The carrier now predicts full-year revenues will grow between 1.5 and 2 percent, compared with its previous guidance of 2 to 2.5 percent issued just 10 days ago with its annual results. (See Telstra Reports Full Year.) Earnings before interest and tax (EBIT) growth is expected to be between 2 and 4 percent, compared to the earlier guidance of 4 to 6 percent.
Telstra stock dropped to a nine-year low on the Australian stock exchange this morning, opening 2.2 percent lower at A$3.55. The falling value of Telstra's shares has put off the Australian government's plans to privatize the company, which were approved by the Parliament last September.
Australian Prime Minister John Howard told Australian Broadcasting Corp. (ABC) radio this morning: "...we certainly wish to go ahead with the sale -- just when of course, is another matter, and there are a range of options that can be followed. We are going to talk about it this week."
In a move that should bolster the chances of a sale, Telstra announced that it still plans to offer a dividend of 28 cents per share for fiscal 2007 it had promised in October.
"The Board recognises the importance of dividends to Telstra's shareholders," the company said in the statement, adding a dig at the regulator: "despite the ongoing value destruction caused by the telecommunications regulatory regime administered by the ACCC."
Telstra has increasingly been at odds with the ACCC over competitive access, dropping its plans for a fiber-to-the-node network earlier this month after a disagreement with the regulator. (See Telstra Abandons FTTN Plan.) The ACCC said last week it's mediating a dispute over LLU access between Telstra and Macquarie Telecom Pty Ltd. .
Prime Minister Howard observed: "We are still in this ridiculous position where the Government is both the principle shareholder and the regulator, and that is part of the problem. That's part of the tension in the market, and I don't think that has a beneficial influence on the share price."
Standard & Poor’s warns that Telstra's long-term A corporate credit rating is under pressure, noting the proposed dividend is "unsustainable in the medium term, as it is likely to be significantly in excess of net profit for the current financial year."
— Nicole Willing, Reporter, Light Reading