MAKEOVER MOVE

Sydney, Nov. 15 (Reuters): Telstra Corp will axe up to 12,000 jobs, a fifth of its workforce, and overhaul its networks in the next five years. However, its shares fell 7 per cent after Australia’s biggest phone company downgraded its outlook and investors fretted about how much the plans will cost.

The measures are part of a company-wide review by new chief executive Sol Trujillo and come before a planned sale of the government’s A$27 billion stake in Telstra in October or November next year.

Telstra forecast on Tuesday its earnings would drop by up to 30 per cent in 2005-06 ? in September it forecast a drop of up to 10 per cent ? as it speeds up writing down existing networks and takes charges for redundancy costs.

However, it guaranteed its dividend for the next three years, committing to pay 28 cents a share for a yield of around 6.5 per cent at its current share price.

Analysts said the market was concerned about how Telstra would execute the plan and was looking for a more immediate turnaround in the business.

“I think the thing that has concerned the market the most is that we have to wait a long time before we get any real cash flow improvements coming through. You’re talking at least fiscal 2008, probably 2009 or even 2010,” said UBS analyst Tony Wilson.

“So it’s kind of like, trust us, we’re going to spend all this money, we’re going to revolutionise the network and there are going to be great benefits but you’re going to have to wait three years before you get them.” Telstra shares slid as much as 7.2 per cent to a 7-week low of A$4.01, before closing at A$4.02. Telstra shares have fallen 17 per cent so far this year, lagging a 14 per cent gain in the broader index.