Telstra sees broadband lift-off at last


Telstra CEO Ziggy Switkowski says his broadband aspirations are on target

By Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Telstra shares are more than 2.7 percent higher Monday after Australia's dominant telco said its high-speed broadband business is on track to meet its target of 1 million subscribers in 2005.

"We have lift-off in broadband demand," Telstra Retail group managing director Ted Pretty told a media briefing in Sydney.

Telstra shares, which touched a four-year low of Aust. $4.45 last month, closed Monday at A$4.88, a gain of 2.74 percent.

Broadband allows higher access speeds to the Internet, using a variety of technologies such as cable, ADSL (asymmetrical digital subscriber line) and satellite.

Mobile wireless networks are also likely to offer higher speeds in future.

Telstra has come in for heavy criticism by market analysts in the past year over the cost, quality and speed of its broadband rollout in Australia, where almost half the nation's 7.5 million households have some form of online access.

But only 300,000 of these 3.6 million Internet-enabled households have broadband access.

More customers signing up

Telstra says it has 175,000 retail and wholesale broadband customers, but is now connecting new subscribers at a rate of 20,000 a month.

Telstra chief executive Ziggy Switkowski said Monday there had never been any doubt in the company's view about the importance of the Internet.

While there had been a relatively slow uptake in broadband initially in Australia, he said the past six months had seen a marked speed-up in subscriber interest.

He said the speed and "always on" qualities of broadband would drive subscriber numbers to the next level of interest and would see Telstra reach its target of 1 million subscribers in 2005.

It was aiming to achieve revenue of A$1 billion ($540 million) from broadband by 2006.

But Switkowski warned that customers wanted compelling content and applications.

"We see this happening over the next five to 10 years," he said.

'Major shift' in strategy

Independent telecom analyst Paul Budde of BuddeComm told CNN Monday that Switkowski's announcement represented a "major shift" in Telstra's strategy from a year or more ago, when it showed little interest in broadband.

Budde, one of the leading critics of Telstra's slowness to embrace broadband, said the telco had "seen the reality" that it could not stop the decline in revenue from public data business.

"The corporate market is totally saturated, so the new growth has to come from SMEs (small and medium enterprises) and residential," Budde said.

For this reason, Telstra was now showing its commitment to broadband.

Pretty, seen as the most passionate Internet advocate within Telstra, said the telco had spent about A$300 million on its broadband rollout so far, and would likely commit another A$900 million in capital spending to it by 2005-06.

"It is really demand-driven from this point forward," Pretty told reporters.

Entry level price


Telstra's Switkowski and PCCW boss Richard Li share expansion ambitions in Asia through joint ventures

Telstra earlier this year cut its entry level pricing for ADSL subscribers to A$60 a month after connection.

Switkowski said the company's vision was to have any device interact with any other device anywhere, anytime, in an online standard operating environment.

As part of that, Telstra unveiled a relationship Monday with Sun Microsystems.

Telstra fell foul of the nation's competition watchdog, the Australian Competition and Consumer Commission, earlier this year over its treatement of its wholesale broadband customers(Full Story).

The telco is Australia's most profitable company and is likely to post a full-year profit of more than A$4 billion ($2.16 billion) when it reports for the year to June 2002 next month.

Telstra dominates the fixed-line, mobile and Internet markets in Australia, and has Asian expansion ambitions built in part around a relationship with Hong Kong's Pacific Century CyberWorks.

Earlier this month Telstra moved to full ownership of Hong Kong mobile operator CSL, buying out the 40 percent stake held by its joint venture partner PCCW for $614 million (Full Story).