Ovum research director David Kennedy said the challenge over the next year is to prevent tough market conditions from eating too much into profitability, while continuing to build market share and scale.

Kennedy said the long-term challenge is to offset revenue declines in the standard telephone business with broadband, mobile and Internet services growth.

But, he added, broadband will take the carrier only so far.

"The percentage growth rate [of broadband] is falling, and we believe the broadband market will go off the boil by 2008," Kennedy said.

"At that point 3G mobile, the Sensis business and Telstra's IT business must be ready to take up the slack. These businesses are generating fast sales growth off relatively low bases, and this must be maintained and even accelerated to avoid a revenue crunch in late 2007.