UPDATE: Telstra Returns To Growth, Investors Snap Up Shares

Australia's largest telecommunications company Telstra Corp. (TLS) said Thursday second half net profit grew 0.3%, compared to a 36% decline in the first half, prompting investors to snap up its shares as a safe-haven in a volatile market.

Telstra, like other major telcos, is grappling with a rapidly changing terrain where mobile phones and mobile internet platforms are increasingly dominant. As such, it has been aggressively campaigning to grab customers from its rivals, including the local unit of Singapore Telecommunications Ltd. (SGAPY), Vodafone Group PLC (VOD) and Hutchison Telecommunications Ltd. (HTA.AU).

Its second half profit of A$2.04 billion for the six months to June 30, was up from A$2.03 billion in the same period last year and its full year profit of A$3.23 billion, although down 17% on the previous year's A$3.88 billion, was better than market expectations about A$3.09 billion.

"We've exceeded guidance in all areas," Chief Executive David Thodey told Dow Jones Newswires.

Investors and analysts were impressed by the earnings given that Australia's two-speed economy is crawling outside the booming mining sector. Punters jostled for Telstra shares driving them up more than 6% to A$3.01 and local investment bank Macquarie described the earnings report as "solid".

In must-have telecoms sectors Telstra grew business. It added 1.66 million new mobile phone and broadband internet customers in Australia during the fiscal year and 352,000 in Hong Kong, with annual revenue from mobile services rising 10.7% to A$8.1 billion, from the previous year's A$7.32 billion.

Telstra is a key player in the Australian government's plan for a nationwide A$36 billion high-speed internet network and has signed an A$11 billion deal to move its customers to NBN Co., the government-owned company rolling out the network.

Chief Financial Officer John Stanhope told analysts at a briefing the impact of the broadband network on Telstra wouldn't be significant in fiscal 2012, while Thodey said he was looking forward to putting the NBN deal, which needs to be approved by the Australian Competition and Consumer Commission, to a shareholder vote at the company's annual general meeting in October.

Telstra forecast low single-digit growth in total revenue and earnings before interest, tax, depreciation and amortization in fiscal 2012. Its full year revenue, excluding finance income, was A$25.09 billion, up from A$24.92 billion the year before.

The company said it would pay a full year dividend for fiscal 2011 of 28 cents a share, and gave guidance it would pay the same amount in fiscal 2012. Telstra is a popular blue-chip stock in Australia because its tax-paid dividend yield is just under 10%.

-By Gavin Lower, Dow Jones Newswires; 61-3-9292-2095; [e-mail]