NEWS - Telecommunications |
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By a staff reporter
Telstra Corporation Ltd's pledge to generate free cash flow of $6 billion by the end of this financial year has received a cautionary note from ratings agency Moody's Investors Service.
On Thursday, Telstra booked a $4.07 billion net profit for the 2008/09 financial year, up 10.3 per cent on the $3.71 billion posted in the previous year. The result is ahead of analyst expectations, which had Telstra posting a $3.7 billion profit.
"The agency noted that Telstra's financial profile appears to be consolidating following a period of high capex (capital expenditure) - associated with the transformation plan - and future guidance from the company implies a picture of stabilising metrics," Moody's said in a statement.
"On the other hand Moody's remains cautious with respect to the company's ongoing free cash flow generation - after interest, capex and dividends - and its ability to return this to more sustainable levels," Moody's lead Telstra analyst Ian Lewis said.
Moody's currently has Telstra on a negative outlook.
"The risk flowing from the company's major transformation has receded to a significant extent. However, the negative outlook continues to capture meaningful uncertainty for the company including the likelihood of increased regulatory controls, possible forced divestitures and evolving financial policies," Mr Lewis said.
Moody's said Telstra's outlook could stabilise if it obtains regulatory certainty, and offers greater clarity on its future financial policies.
On the other hand Moody's said Telstra could experience downward ratings pressure if its credit profile deteriorates on adverse regulatory decisions, weak operating performance or unfavourable debt-earnings ratios or negative free cash flow past 2010.
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