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More Australians hanging up on Telstra -

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More Australians hanging up on Telstra

Peter Ryan reported this story on Thursday, February 11, 2010 12:21:00

ELEANOR HALL: Is it the end of the line for traditional phones?

Telstra today reported a big drop in the number of Australian households using landlines.

Telstra's CEO said the trend is accelerating at what he described as a disturbing speed, saying
this was behind the fall in the company's half year profit which is down 3 per cent to $1.8
billion.

Telstra's shares were hammered on the share market in response to the announcement and investors
are angry that the company has made no change to the dividend.

Business editor Peter Ryan again.

PETER RYAN: The traditional fixed line telephone connection to almost every Australian home was
once Telstra's bread and butter.

But for the past five years customers have been hanging up on Telstra, using their mobile phones
instead, not just for voice calls but for text messages and emails.

Telstra has been battling to reverse the trend but today the telco's chief executive David Thodey
admitted he's losing the fixed line war.

DAVID THODEY: The decline has been more severe and pronounced than we had anticipated.

PETER RYAN: David Thodey's controversial predecessor Sol Trujillo revealed the demise of fixed line
connections in 2005 shortly after his appointment. Back then Telstra shares dived when its profit
forecast was revised.

Today's admission from David Thodey that connections have fallen almost 7 per cent in six months
saw Telstra shares fall more than 3 per cent.

DAVID THODEY: Voice traffic is down across all categories. Now that's local, national long
distance, international and fixed to mobile - all decreased. So that's straight calling volumes. So
that's a real change in terms of behaviour going on in the market.

Now the majority of that decline was in the local call category. Local call revenue is down almost
13 per cent and our customers are now making five less local calls to what they did just a year
ago.

PETER RYAN: Although households are dumping their traditional phone lines they're not necessarily
switching back to Telstra.

The telco is also losing market share in new mobile and fixed internet services.

David Thodey indicated Telstra still has some work to do on its customer service.

DAVID THODEY: Going on and acquiring customers and not given a good customer service experience is
not acceptable. And we're pleased to see the early signs of an improvement in that area but we've
got to keep going.

PETER RYAN: Another area of uncertainty for Telstra is the touchy area of government relations.
Telstra is yet to get a foothold in the $42 billion national broadband project and the Government
wants to split its wholesale and retail operations.

David Thodey says don't expect a resolution any time soon.

DAVID THODEY: We remain very constructively engaged with both the Government and NBN Co. and we do
remain committed to try to find a mutually acceptable outcome.

But I've got to stress these are very complex considerations, very complex, and we need to move
slowly and very deliberately.

PETER RYAN: At the same time investors are unhappy that Telstra's dividend has been left unchanged
at 14 cents a share.

INVESTOR: You know I know you've got some uncertainties around NBN but you know, surely
shareholders themselves should be making that decision about what capital if any goes into NBN. And
I'm just I've got to say disappointed that we haven't seen an extra cent or two in dividend this
half year.

INVESTOR 2: That's what the board decided in light of the future outlook for the company with NBN.
They felt that it was better to hold at this time.

PETER RYAN: That's little comfort for shareholders who rely on Telstra as a dividend stock. But
most analysts say the pain for Telstra is far from over as long as its traditional revenue such as
fixed line phone connections continue to bleed.

ELEANOR HALL: That's business editor Peter Ryan.