Telstra reveals Defence deal win, growth strategy

Nanjing Night Net

TELSTRA has won a communications contract worth about $150 million a year with the Department of Defence, and outlined a growth strategy for the next year at its annual investor day.

Shares reached a three-year high of $4.14 during the briefing, the highest price since the government announced it was building a national broadband network and ending Telstra’s monopoly over fixed communications in Australia.

Shares went up even though Telstra will no longer guarantee a fully franked 28�0�4 dividend. It would instead announce dividends at financial results every six months, chief financial officer Andrew Penn said.

Management would focus on growing the business so it could ”increase the dividend over the long term”, he said. ”We recognise very much that what our shareholders want is good returns from Telstra. One of the ways we can deliver that return is through a dividend.”

But Mr Penn would not commit to a dividend payout ratio, which would ensure Telstra shareholders get a set amount of the annual profit.

Meanwhile, Telstra would enter negotiations this week to supply all of Defence’s terrestrial communications after being named as preferred tenderer, chief operations officer Brendon Riley said.

While Telstra would not say how much the contract was worth, Defence told bidders that it spent $156 million on terrestrial communications in 2008-09, according to a briefing document.

The contract is to upgrade, replace, standardise and rationalise Defence’s existing network, which contains about 70,000 desk computers, 15,000 laptops and 600 BlackBerries and is spread across 330 locations in Australia.

Chief executive David Thodey outlined five strategies for Telstra in 2013-14 including: maintaining its lead in the mobile market, winning fixed-broadband customers, taking out more costs, growing the business and creating a ”customer service culture”.

He told investors that Telstra had ”no god-given right that it will be successful” and that its success would depend on executing plans to grow the business while the NBN is built.

”NBN [deal] is done. I have moved on. Yep, there are some fights ahead of us, but I think we are more about positioning ourselves for those fights and how to be really a good competitor in the market and do well,” Mr Thodey said.

These include a push to exploit Telstra’s undersea international cable network to provide managed services to global companies. Mr Riley said Telstra would focus on selling a full telecommunications service to Australian and other companies setting up in Asia.

Mr Thodey also announced Telstra would trial NBN Co’s fixed wireless NBN services with a view to launching them in mid-2013 and was ”considering our options for satellite services”.

And asked whether Telstra would oppose Foxtel selling broadband services – a strategy that has helped pay TV operators grow customer numbers overseas – Mr Thodey said there was ”nothing in the relationship between Telstra and Foxtel that prevents them from reselling telecommunications services”.