Michael Pascoe writes:


If you’re a Telstra 3G mobile phone customer, you’re either a mug or a business user. There might be another explanation for why, on average, you’re spending $240 a year more when you move from 2G to 3G, but I can’t quite see it. Do people really like paying a pile of money to watch naff video on a postage stamp?

The 3G and broadband success were the upside that Telstra’s top tortilla was focusing on in his pitch to analysts this morning. The billion dollar fall in bottom line profit – its worst result since it floated nine years ago – is what caught the headline writers’ attention.

There’s more detail than most people will ever want to know on the ASX website but the initial bits of most interest are the size of the decline of fixed-line network revenue, the rather pedestrian Sensis performance after such big promises were made for it, the already mentioned strong mobile and broadband growth and the cost of Team Trujillo. Most of that billion profit fall can be put down to Sol’s “transformation’ costs i.e. the new CEO clearing the decks with retrenchments and write-downs.

After the market had a little time to think about it, the verdict seems to be that the result isn’t as bad as it might have been. Certainly Sol was trying to put the most positive spin on it – almost as if he would now like to see the share price rise instead of keep plunging.

He even found something good to say about the falling fixed-line revenue: the rate of decline was lower in the second half than in the first, 5. 8 per cent compared with 7.6 per cent, but of course that’s still RS.

Whatever the complaints about broadband speeds, Australians are lapping up what they can get, pushing broadband revenue up 65 per cent to $1.2 billion. That compares with mobiles revenue up 6 per cent to $5 billion. Sol’s boast under the heading “high calorie growth” (Taco Bell?) is that Telstra gained 3 per cent market share in broadband and that those 3G phone customers are spending like crazy – 37 per cent more than 2G customers.

Less flash though is Sensis’ 6.9 per cent revenue growth. This was supposed to be the directories division that was going to set the world on fire. You won’t burn on 7 per cent growth. Maybe some of the stories we hear about the Trading Post acquisition going badly are true.

And perhaps the 3G story is where the broadband circus is really heading. Sol’s 3G roll out is already claiming 98 per cent population coverage with average network data speeds of 500 kps, increasing to 14 Mbps in 2007. Who really needs a new and very expensive fibre network?

And that’s the problem with Sol and his amigos – we still don’t know whether they’re delivering or just big noting.