Telecom guidance downgrade: copper's a problem

Thursday 15th April 2010

Telecom's copper network regulation does not work in a fibre age, says Telecom in a profit downgrade for 2011 to 2013 announced this afternoon after a trading halt of more than five hours in New Zealand.

“We are highly focused on how we position Telecom for a UFB world, and the implications for this on Telecom’s regulatory undertakings which are designed for a copper, not fibre world,” Reynolds said.

“We are open to working with the government on a full range of approaches to its UFB initiative.”

Earnings forecasts for the next three financial years to 2013 were cut.

Telecom now expects to make EBITDA of between $1.72 billion and $1.78 billion in 2011, down from between $1.82 billion and $1.855 billion.

In 2012, it cuts it EBITDA forecast to between +$20 million to +$80 million, compared to a previous range of +$70 million to +$110 million.

The projection for 2013 was reduced to a range of +$20 million to +$80 million from +$75 million to +$115 million.

The shares slumped 3.3% to $2.17 after the downgrade and is scheduled to brief media and analysts at 4pm, NZT.

The country’s largest phone company also cut its forecast for capital expenditure this year to between $1 billion and $1.1 billion, from $1.1 billion to $1.2 billion, and flagged new capital expenditure of between $1 billion and $1.1 billion in 2011, a figure that hadn’t previously been provided.

It kept its guidance for this financial year, though this has already been downgraded twice due to problems with the company’s XT mobile network, and the government’s proposals to change the Telecommunications Service Obligation, where Telecom has been able to leverage cash from its rivals to provide essential phone services to hard-to-reach customers.

The guidance assumes AAPT, the company’s struggling Australian unit, won’t be sold, and that there won’t be any impact from the government’s $1.5 billion subsidy to the roll-out of fibre in the main centres of the country. The phone company put down the softer revenue outlook to a fall in mobile growth, price pressures in voice and data markets, along with the ongoing problems of a weaker economy.

Businesswire.co.nz

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