Australia's largest telecommunications company, Telstra, provided investors with some good news when it held its investor day in Sydney yesterday.
Chief executive David Thodey assured investors that, based on current performance, the company could "comfortably" continue to pay shareholders an annual dividend of A28c a share.
"Telstra's board has always been acutely aware of the importance of dividends to shareholders.
Because of our strong fee cash flow, Telstra could comfortably fund a A28c dividend in 2010-11," he said.
"The purpose of our strategy in 2010-11 is to improve the company's long-term ebitda and cash flow, which will underpin our ability to fund dividends in the future."
Craigs Investment Partners broker Chris Timms said there had been some uncertainty around the ability of Telstra to continuing paying dividends given its capital expenditure.
Telstra's share price rose 2% once Mr Thodey outlined the plans.
Another positive part of the Telstra presentation was an indication of the roll-out of the Australian National Broadband Network (NBN), which had been a major part of the Australian election campaign, Mr Timms said.
Telstra was facing a host of challenges similar to those faced by Telecom New Zealand.
"All of the new young bloods are targeting their market share and both companies are being knocked around by regulation."
Telstra's challenges also included the execution risk around the new strategy to recover its competitive position, revenue pressure and regulatory uncertainty in the fixed-line business.
NBN had emerged as a politically charged football for Telstra, Mr Timms said.
"On that basis, we expect the stock to remain a high-risk proposition for some time, despite some valuation support emerging at lower share price levels," he said.
Mr Thodey outlined how Telstra would be changed in three years.
"Telstra will be faster and more customer-centric. We will have lower costs and higher productivity. We will have sales and marketing expertise to match our network and engineering experience. And we will have capitalised on profitable new growth businesses in media, international markets and network-based applications and services."
The long-term strategy would take advantage of changes in technology, a growing sales and marketing-led culture and simpler company systems that lowered costs, he said.
The strategy must be implemented irrespective of the NBN.
Sales grew in July and August as consumers responded positively to recent price changes, new bundled offers, new products and customer service improvements.
Telecom holds its annual meeting in Christchurch today.
