Telstra profit drops by A$1.1b

Australia's dominant telecommunications carrier Telstra has suffered a sharp fall in annual profits, with a bottom line result of A$3.18 billion.

The profit is down 26 per cent, or more than A$1.1 billion on the previous year.

Telstra's board has declared a final dividend to shareholders of 14 cents a share.

The result was below market expectations of a A$3.4 billion profit.

Telstra's operating expenses have blown out by almost 14 per cent, due largely to restructuring and redundancy costs.

On the income side, fixed-line revenues have dropped by a further A$540 million but broadband revenues jumped almost A$470 million and mobile phone and advertising figures are also up.

The poor performance comes as the Federal Government weighs the sale of its remaining 51.8 per cent stake.

Telstra's chief executive officer, Sol Trujillo, says the results are at the better end of earlier projections.

"So the story, I guess, to put it simply, will be simply one that says we are on track, we're on budget and we're on time," he said.

The company says it is continuing to take some "tough medicine" but the transformation of its business is on track.

Last November, Telstra announced it would restructure with the loss of 12,000 jobs over five years.

Mr Trujillo warned the restructure would hit next year's profit.

"We are seeing the impact of this on our results for fiscal 2006 and our transformation spending will remain high over the next year," he said.

Telstra shares have dropped more than 25 per cent over the past year.

- RADIO AUSTRALIA