Paul McIntyre: A good time for comeback kids

It's been a week for comeback kids in Australian business.

Commonwealth Bank chief David Murray buried his critics on Wednesday with a 50 per cent rise in first-half profits to A$1.86 billion ($1.98 billion), which resulted in the market value of ASB Bank's parent jumping another A$1.7 billion. Australian banking stocks are once again a hot item.

Murray has been widely tipped as a contender for the chief executive's role at Telstra, but he buried those suggestions on Wednesday. "It's obvious people would want to talk to me, but it's just not on my agenda," he said.

The markets weren't too worried about that blip, particularly when, the following day, outgoing Telstra boss Ziggy Switkowski did a David Murray by surprising investors with a better-than-expected A$2.34 billion half-year profit, pushing Telstra's share price to a three-year high.

Switkowski earned himself a swag of brownie points this week from the federal Government as it moves closer to finalising a shortlist of investment banks and lawyers for a scoping study for offloading its final 51.8 per cent stake in the telco giant - the biggest selloff in Australian corporate history.

At the current share price of around A$5.30, the Government is sitting on a A$34 billion windfall. The third and final round of Telstra shares to hit the market is expected in the second half of 2006, although the Government still has a big PR job to do convincing regional and rural Australia they won't be left in a communications vortex by a fully privatised Telstra.

And you can bet the federal Opposition will be fanning those flames. In fact, on Thursday it was in full swing, claiming business and consumers had paid dearly for Telstra's latest results.

"The Government has a plan to sell Telstra but no plan to protect consumers," said Labor's communications spokesman, Stephen Conroy. "All they care about is fattening Telstra up for sale. They are selling Telstra and selling out consumers."

Certainly, what investors liked about Telstra's latest results was its robust performance in mobile phones and broadband. Mobiles particularly have proven problematic for Telstra as Optus and Vodafone have ramped up their efforts. But the Big T has bounced back. In the December quarter, for instance, Telstra added 318,000 subscribers compared to 283,000 for Optus and 156,000 for Vodafone. Overall, mobile subscribers rose 14.3 per cent to 7.9 million.

"I'll always be at the bullish end of expectations in mobiles," Switkowski said. "Initiatives from Vodafone and Hutchison have really fuelled growth in the marketplace and excitement amongst customers and I think that will continue.

"In my judgment this market is buoyant. While it doesn't have the feel of the 1990s, it is a whole lot healthier than it has been for a while - growing at 4 and 5 per cent - and we [Telstra] are near the top end of that band at the moment."

Sweet music. And more so because Telstra's broadband strategy is kicking in. Internet and IP revenues rose 33 per cent to A$624 million for the six months to December last year, while broadband subscribers lifted 142 per cent to 1.2 million.

Just over half that number are Telstra BigPond retail customers, the remainder are wholesale subscribers coming from rivals using Telstra's infrastructure. Switkowski said the broadband market was "booming".

The final name in the trio of comebacks this week is Kerry Stokes' TV operations, Network Seven.

Seven has been punched from transmitter to TV screen and back in the past two years by the Ten Network and Kerry Packer's Nine. Seven's audience numbers have been battered by poor local and international programming, but it pulled off a coup over the summer break by winning the top rating slot. Then last week - the first of the official ratings season - Seven knocked off Nine again, winning the top audience share and blew the programming socks off its rivals with the biggest debut TV series in Australian TV for a decade with the US blockbuster Desperate Housewives.

Along with a handful of other high-performing shows, Seven is suddenly a hot stock. Major advertisers and media buyers are scrambling to book airtime. Former Nine chief David Leckie, who was dumped by Packer three years ago and showed up at Seven a year later, is smiling, although it is still very early days.

The Packer camp, particularly, does not like losing - Nine has been the annual top-rating network for 20 years. What is particularly grating for Nine is that Seven is breathing down its neck on hallowed turf: news and current affairs.

If Seven can keep it up for the 44 weeks of the official ratings season, the scrap between Big Kerry and Little Kerry will be a corker.

* Paul McIntyre is a Sydney journalist