Telecom emphasises cost savings

By Phil Boeyen, ShareChat Business News Editor

Friday 10th May 2002

Market heavyweight Telecom (NZSE: TEL) has shown little revenue growth in the third quarter but is highlighting an improved position thanks to lower costs.

The company reported net earnings Friday of $168 million for the three months ended March, based on what it called a "solid performance by the group in New Zealand and Australia."

TEL says underlying earnings before interest, tax, depreciation and amortisation for the third quarter was $573 million, up 7.3% on the corresponding period in 2001. Revenues grew by 0.3% and operating expenses were cut by 4.2%.

Chief executive, Theresa Gattung, says the company's drive for better performance in Australian operations is producing significantly improved results.

"Our cash flow position has improved radically, due to third quarter growth in Ebita and a tight rein on capital expenditure," said Ms Gattung.

"Telecom's New Zealand businesses are showing resilience. Revenues are up overall, with strong performances in Data and Internet services, while expenses are under control."

Ms Gattung says positive operating cost trends in Telecom businesses on both sides of the Tasman are a strong feature of third quarter and nine month results, along with reductions in capital expenditure.

For the nine months ended March the company has reported net earnings of $480 million, with an underlying result of 438 million excluding cross-border lease gains and capacity sales.

Capital expenditure for the nine-month period was $567 million, 45% lower than for the same time last year.

"The reduction reflected tight control on capital programmes and completion of major projects, including the CDMA wireless network in New Zealand," Ms Gattung says.

Full-year capital expenditure is expected to be around $825 million, down from $1.5 billion previously, with a further reduction to $780 million next year.

Ms Gattung says the company is focusing on improving margins and cash flows in Australia, while developing the potential in its data, internet and mobile businesses in New Zealand.

"Pleasingly, we expect the group to be cash flow positive (Ebitda less capex) in Australia in the current quarter as we continue to refocus some of those operations and maintain tight control of capital expenditure.

"Core businesses in New Zealand are showing real resilience and we're well positioned to drive growth trends in data, both fixed line and wireless."

The company is once again paying a quarterly dividend of 5 cents per share, fully imputed.

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