Telstra confirms revenue challenges

TELSTRA chief Andy Penn says the economics of the national broadband network are “challenging”, but his organisation remains committed to being the market leader.

Speaking at a strategy day for investors yesterday, Mr Penn said wholesale prices on the NBN made for “extremely slim” margins for retailers offering services on the network.

That would exacerbate the major earnings hit Telstra expected once the network was complete, he said.

“While the current economics are challenging, I am confident that ultimately the dynamics will improve,” Mr Penn said.

The growing number of resellers of NBN services was leading to significant downward pressure on pricing, he said.

The NBN rollout, once completed, was expected to leave Telstra with a $3 billion loss in earnings.

Mr Penn said he was sure Telstra was buying enough bandwidth on the NBN to meet customer demand, as robotic testers were sampling customer speeds and giving the telco confidence in its provisioning.

The Telstra chief also warned of increased competition in the mobile market, with TPG Telecom planning to become the fourth major operator.

“One of our critical objectives is to achieve growth in mobile services revenue which has been under pressure from these competitive dynamics over the last two years,” he said.

Shares in Telstra closed down 1.7 per cent yesterday at $3.51.