The biggest news from the announcement is the rapid deterioration in Telstra's revenue guidance. In the space of only three months, revenue guidance has fallen from "single digit growth", to "flattish", to "single digit declines".
This is a consequence of the acceleration in PSTN decline, and demonstrates the sensitivity of Telstra's performance to its PSTN business. Telstra's PSTN performance has been good by global standards, but its recent deterioration seems to have caught Telstra by surprise.
This also underlines the importance of the NBN negotiations for Telstra, which have the potential to disrupt its entire fixed-line business.
The good news was that fixed broadband and mobile revenues were resilient. In particular, fixed broadband revenue performance recovered in late 2009, despite its long-term decline in retail broadband market share.
Cost control was another bright spot, with healthy cost savings from the transformation going directly to the bottom line. If this continues as expected in the second half, it will underpin consistent profitability and cashflow performance.
In the medium term, we see some thunderclouds. Telstra's difficulty in differentiating itself in the consumer market will be a weakness. In addition, ongoing profitability performance will depend on Telstra's ability to keep the cost base moving downwards and using its transformed capabilities to get new customers and higher revenue yield in its major markets.
