ACCC grants Telstra service and line rental exemptions

According to the ACCC, the ‘in-principle’ decision relates only to wholesale voice services, not broadband services - which are not subject to open access regulation. Although the proposed exemptions are not as broad as requested by Telstra, they cover 248 exchange service areas.

The ACCC declared that while this has increased from the 229 exchange service areas proposed in the ACCC's draft decision on Telstra's applications, the rationale behind the decision remains broadly the same.

The proposed exemptions are subject to a number of conditions, some of which are additional to those proposed in the ACCC's draft decision on Telstra's applications. The ACCC stated that the additional conditions deal with impediments faced by some access seekers when seeking to use the unbundled local loop service.

“Specifically, these impediments are lengthy queues to enter into Telstra's exchange buildings and service disruptions when migrating from the line sharing service to the unbundled local loop service,” noted the ACCC.

The proposed exemptions are also subject to a condition regarding exchange capping, which varies from the corresponding condition proposed in the ACCC's draft decision, stated the regulatory body.

The news comes as Telstra recently declared that its full-year results show how far the carrier has come, but also the magnitude of the challenge before it. According to research firm Ovum, Telstra’s strong revenue result was even better than it appeared.

“Overall sales growth of 4.7 percent masked retail sales growth of 6 percent, because wholesale fell 5 percent due to the rollout of competitor ULL-based networks,” said David Kennedy Research Director at Ovum.

The analyst expects wholesale to stabilise in the next 18 months as ULL expansion is stopped by FTTN, and this will push up revenue growth, provided the current retail growth can be sustained. While expense growth was contained at 3.5 percent, so Earnings Before Interest Tax Depreciation Amortisation (EBITDA) grew 5.6 percent and EBITDA margin grew from 41.7 percent to 42.2 percent.

“Telstra will need every penny of revenue growth to hit their profitability target for 2010”, Kennedy said. Telstra's target requires it to raise EBITDA margin from this year's 42.2 percent to at least 46 percent by then, which will take both faster revenue growth and significant cuts to expenses.”

Kennedy claimed, having rolled out its new Next G mobile network and Next IP data network, Telstra is currently focused on moving its customer base to its new CRM and billing systems by the end of calendar 2008. “The old CDMA mobile network has already gone, and we should see further big operating cost savings in 2009 as old IT systems are decommissioned,” he said.

Hitting such ambitious profitability targets requires this process to run smoothly, on budget and on time. “This is especially the case because there is a question mark over continued revenue growth in a tough macroeconomic environment. The biggest challenge is yet to come”, added Kennedy.