"We have slowed the PSTN decline."

Revenue grew 2.0 percent compared to the first half of last year, though rising transformation costs pushed half-yearly profit down 20.1 per cent.

Transformation costs are expected to peak this year, and the cost-cutting effect of the transformation is expected to show itself towards the end of 2007.

"This means that profitability and cash flow improvements will flow through beginning in 2008, leaving Telstra on track to achieve its 2010 targets," according to Trujillo.

Ovum's Kennedy said that in the mobile market Telstra delivered impressive top-line results.