Telstra updates strategy, confirms financial guidance

Telstra today confirmed its financial guidance for 2009/10 and detailed how the company would grow its core business by improving customer service and taking advantage of recent technology upgrades.

At a briefing for institutional investors in Sydney, CEO David Thodey reiterated financial guidance for 2009/10 that the company would achieve free cash flow of $6 billion, low single digit growth in revenue, EBITDA and EBIT, and maintain its EBITDA margin, but noted that the appreciation of the Australian dollar had created pressure on revenue earned from overseas subsidiaries.

Mr Thodey told investors that his strategy refresh would not lead to a fundamental change in the company's direction, but that recent investments in upgraded technology should now be used to substantially improve customer service, expand further into developing and adjacent businesses, and offer online applications that are valued by customers.

"Telstra has invested $12 billion over four years in advanced technology, and now it's time to take advantage of those investments to defend and grow the core business," Mr Thodey said.

"The company requires continuity and stability in the current environment - we must focus on our core business and our customers - this is where we create value for shareholders.

"At its simplest, the next stage in Telstra's long-term strategy is to focus on satisfying customers, invest in new capabilities, and drive growth in new businesses.

"This will further differentiate Telstra from the competition, improving our position in the retail market irrespective of regulatory settings and the National Broadband Network, and ultimately deliver shareholder value," Mr Thodey said.

Mr Thodey told investors that Telstra would take advantage of its recent network and IT upgrades to -

• Substantially improve customer service by making it faster, easier and simpler for customers to deal with Telstra.
• Move 'up the value stack' by participating in the profitable and fast-growing markets for online content, applications, products and services.
• Expand further into adjacent and complementary markets like IT storage, security and web-hosting that support the growth of enterprise, government and small business customers.
• Add value to fixed-line telephone services with devices like T-Hub, a new touch-screen home phone that combines telephony, Internet services and a media player.

Mr Thodey also confirmed that Sensis and Telstra Media remain core assets and are performing well, and that Telstra would further develop its new media businesses in China and selectively invest around its Asian businesses.

The company also confirmed that its four year-long transformation has largely been completed, giving Telstra world-class IT systems, platforms and infrastructure - like the Next G™ and Next IP™ networks - that will benefit the company, customers and the nation for many years to come.

More than 10 million customers and 20 million services have been transferred to new platforms, which will make it easier, simpler and faster for customers to make enquiries, order new products or change their services.

The transformation has been completed for $12 billion (within two percent of budget), already delivered $5 billion in incremental revenue compared to consensus forecasts, and would deliver many more benefits in future.

"Despite Telstra's strengths we do not take our success for granted, but we believe that technology leadership and improved customer service will help us win and retain customers, grow the business and deliver shareholder value," Mr Thodey said.