Friday, August 10th, 2012 - OVUM
OVUM COMMENT David Kennedy, Research Director and Nicole McCormick, Senior Analyst - Telco Strategy, Ovum

Mobile was again the star performer for Telstra, with total revenue growth of 8.5 percent year on year. Telstra also announced accelerated LTE investment of AUD$1.2 billion in FY13.

Telstra prides itself on its network lead and differentiation. With accelerated investment in the LTE network, we believe Telstra’s mobile rivals will find it difficult to challenge Telstra’s network superiority. They will need to pursue strategies as `alternative’ providers to Telstra.

The second driver of Telstra's business is its productivity performance. What is impressive is that Telstra is able to take cost out of the business - AUD$1.1 billion in FY12 - while improving customer outcomes, as evidenced by the 26 percent decline in TIO complaints over FY12. Of course, customer satisfaction is improving off a low base, but this also means that there is lots of future improvement that can be flushed out of Telstra's operations, suggesting that productivity growth should be sustained into the future.

This provides Telstra with three sources of cash: its traditional high-margin businesses, which are waning; its improved productivity performance; and its payments under the Telstra/NBN agreement.

These all add up to sustained cashflow advantage that can be devoted to capital investment. As a result, we do not see any challenge to Telstra's infrastructure leadership, particularly in mobile, in the foreseeable future.

---ENDS---

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Mobile was again the star performer for Telstra, with total revenue growth of 8.5 percent year on year. Telstra also announced accelerated LTE investment of AUD$1.2 billion in FY13.

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