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Telecom cautious

Friday 7th November 2003

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Although Telecom New Zealand posted a quarterly profit of $162 million ­ up 11% on the same quarter last year ­ the company is more cautious on when it will lift its dividend. At its annual result three months ago chief executive Theresa Gattung said the company wanted to lift its dividend, from 5c a share, at some point over the next financial year.

This week the company was more cautious, saying it is "on track to review dividend payout ratio once we have demonstrated that credits targets can be comfortably maintained." The company is aiming at a credit upgrade from Standard & Poor's later this financial year and is not going to want to risk that. With the world telecommunications sector still carrying massive debt, the company is keen for a higher credit rating to make it stand out. However it appears the company will be spending more on its mobile network.

Accompanying the profit announcement was the strongest indication yet that Telecom is considering shifting building a wide band CDMA network to further compete with Vodafone, which is now ahead of Telecom mobile telephone customers.

A further uncertainty for Telecom is the "local loop unbundling" determination from the Commerce Commission, which would force it to open up its local network to competitors.

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