Telecom adjusted full year earnings up 1.6 pct

NZPA

Friday 19th August 2011

Telecom is reporting adjusted full year earnings up 1.6 percent to $388 million, as it works toward splitting off its Chorus unit which was chosen to partner the Crown in its ultrafast broadband (UFB) programme for most of the country.

In the year to June 30, full year adjusted revenue was down 3.2 percent from a year earlier at $5.1 billion, while adjusted expenses fell 5.8 percent to $3.3 billion.

Telecom highlighted a 2.1 percent rise in adjusted earnings before interest, taxation, depreciation and amortisation (ebitda) to $1.8b, which was above guidance.

A fully imputed fourth quarter dividend of 7.5c per share is to be paid, along with an additional fully imputed special dividend of a further 2cps, bringing the total for the year to 20cps.

Reported net profit was down 56.8 percent to $164m.

The adjustments making up the difference between reported and adjusted earnings included $257m of asset impairment charges on copper-based regulatory assets due to the combined effect of a move to a fibre-oriented world and regulatory developments.

The fundamental change in industry structure resulting from the Government's UFB initiative meant some assets built for a copper-based and operationally separated world would no longer be relevant, Telecom said.

While the new industry structure would be sustainable for Telecom, the industry, customers and shareholders, it would also be the third industry structure for telecommunications in this country in five years.

That series of rapid changes had created significant compliance and participation costs.

Other adjustments included $29m costs related to the UFB proposal, and $42m recognised in relation to the Canterbury earthquakes, although Telecom did gain $18m from the sale of the consumer division of its Australian AAPT operations and $88m in tax effects related to the adjustments.

Telecom chief executive Paul Reynolds said work to demerge Chorus by the end of the calendar year continued apace.

Mobile revenue grew by 5 percent in the second half, compared to a year earlier, while mobile data revenue grew by 8 percent, reflecting the growth in smartphone and mobile broadband usage, Reynolds said.

The XT network now generated 82 percent of mobile revenues, with the company having been successful in attracting new high value customers, who had average revenues per month of greater than $75.

Total mobile subscribers were down by 95,000, with the decline predominantly made up of low value pre-paid CDMA customers going inactive, he said.

That trend had minimal impact on revenue and was likely to continue as Telecom moved closer to the close down of the old CDMA network, which was on track to be done by July 2012.

The total broadband market continued to grow, with a further 90,000 new broadband subscribers added during the half, Reynolds said.

Telecom Retail’s market share of connections had remained stable at 53 percent, and retail average revenue per user was steady.

Group IT services revenue was up 14 percent in the second half, mainly driven by managed services and procurement.

Chorus ebitda for the second half rose 8.6 percent to $415m, with the fibre-to-the-nod project remaining on track and expected to be under budget.

The wholesale and international unit had second half ebitda down 24.7 percent to $73m, reflecting a shift in product mix as Chorus' fibre-to-the-node programme neared completion, Telecom said.

Telecom Retail's second half ebitda rose 10 percent to $253m, with a focus on margins and on attracting and retaining high value customers.

Information and communication technologies provider Gen-i had a 6.5 percent rise in second half ebitda to $132m, as it simplified and focused its activities including the withdrawal of more than 100 products.

With the demerging of Chorus expected in the present financial year, Telecom removed all guidance.

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