Telecom 3Q profit falls 39% on drop in calling, FY guidance dims

Friday 7th May 2010

Telecom, which is threatened with loss of dominance from the government’s roll-out of ultra-fast broadband, posted a 39% drop in third-quarter profit and said full-year earnings would be at the low end of guidance as calling revenue falls.

Net income declined to $97 million, or 5 cents a share, from $159 million, or 9 cents, a year earlier, the Auckland-based company said in a statement. Earnings beat Forsyth Barr’s estimate of $84 million. Operating revenue declined 10% to $1.4 billion.

The phone company has faced the combined effects of a slower domestic economy, more regulation and increased rivalry. At the same time it has been forced to contend with outages on its XT network, for which is compensating customers, while trying to ensure it gets played a hand commensurate with its size in the government high-speed broadband initiative and weathering the burden of increased regulation. Telecom separately released the findings of an independent review into XT which found customer uptake had been too quick for the network to cope.

“This result has been delivered in a very challenging operating environment, including increased competition, the continued impact of the economic slowdown, further regulatory interventions and issues with out XT network,” chief executive Paul Reynolds said.

The company kept its third-quarter dividend unchanged at 6 cents a share.Telecom reiterated its guidance for full-year ‘adjusted’ net earnings at $400 million to $440 million, though it said profit is now likely to be in the lower half of the range and is subject to any changes in tax legislation. By division, calling showed the biggest decline in revenue in the third quarter, dropping 22% to $245 million.

Local service fell 1.2% to $256 million and mobile, where Telecom competes with Vodafone and 2Degrees, revenue flat-lined at $199 million. Data sales dropped 3.7% to $157 million and broadband and internet slipped 5.4% to $149 million.

Shares of Telecom were unchanged at $2.15 yesterday and have declined 23% in the past 12 months.

Businesswire.co.nz

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