* H1 underlying profit A$1.79 bln vs analysts' A$2.04 bln
* Shares drop 5 pct, biggest fall in more than 4 yrs
* New investments slow to replace falling traditional income
(Adds quotes, shares price move)
By Tom Westbrook
SYDNEY, Feb 16 Australia's largest telecoms
company, Telstra Corporation Ltd, on Thursday posted an
unexpected 11.8 percent fall in first-half profit, dragged down
by declining revenues for its mainstay fixed-line and mobile
The company's shares registered their biggest intraday drop
in more than four years on fears that new investments made to
offset falling income from traditional sources were not
contributing to the bottom line fast enough.
"Realistically if one puts them in the context of Telstra,
they're not going to be material additions to economic EBITDA
pre-2020," Chief Executive Andrew Penn told investors on a
Telstra's growth strategy has been to defend mobile market
share by spending A$3 billion ($2.32 billion) on its network,
while looking to venture-capital to find growth in new
businesses such as mining, healthcare and cloud computing.
But none of these are yet picking up the slack against the
traditional revenue declines.
"Our aspiration with them really, for 2020 and beyond, is to
build some new profit growth for the company through these
areas," Penn said.
Telstra's underlying profit for the six months to Dec. 31
was A$1.79 billion, missing analysts' expectations for a profit
of A$2.04 billion and tracking below company guidance for
mid-to-high single-digit growth through the year.
The company said it was now likely headed for the bottom end
of its previous guidance.
Telstra shares fell 5 percent in early trade to A$4.93,
their biggest drop since August 2012, while the broader S&P/ASX
200 was flat.
Telstra dominates the mobile telephone and broadband
industries in Australia. But like incumbent telecoms around the
world, Telstra is facing falling profits from its traditional
fixed-line networks and competition is squeezing mobile margins.
"Fixed voice is in decline as some people give up fixed
voice, but we kept our decline there in single digits which is
creditable compared to the rest of the world," Telstra Chief
Financial Officer Warwick Bray told Reuters.
The company said a one-off regulatory charge stemming from
government price-setting in the wholesale messaging market had
weighed in particular on the mobile business, which reported an
8.7 percent fall in revenue.
Telstra is also facing an additional hit to earnings before
interest, tax, depreciation and amortisation (EBITDA), forecast
by the company to be between A$2 billion and A$3 billion, from
the loss of its wholesale business when a new government-owned
broadband network replaces Telstra's copper lines by about 2020.
Bray said that so far Telstra had 51 percent market share on
the new network.
The company announced a steady interim dividend of 15 cents
($1 = 1.2955 Australian dollars)
(Reporting by Tom Westbrook; Editing by Stephen Coates)