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Mobile income tipped to slow

By Duncan Bridgeman

Friday 8th August 2003

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A telecommunications report out this month will give mixed signals for Telecom's Australian operations.

Analyst Paul Budde said his upcoming annual report on the Australian industry showed an improved forecast for Telecom subsidiary AAPT but warned of a sharp decline in mobile revenue growth in the region.

Mr Budde predicted AAPT would reclaim lost ground next year, possibly taking 2% market share from Telstra.

But it was uncertain whether the company would be able to turn new growth into profits as margins in the fixed voice market remained low, he said.

Telecom chief executive Theresa Gattung expected continued improvement in Australia, which was now established as a positive-cashflow contributor to the group, year on year.

Cashflow was $92 million in 2003 compared with negative $28 million a year earlier.

Last year Telecom wrote down the value of AAPT by $850 million.

"We've made considerable progress with margins rising throughout the year," Ms Gattung said.

Telecom's Australian earnings before interest, tax, depreciation and amortisation (ebitda) increased 3.3% to A$156 million while ebitda margin was 12%, up from 10.3% in 2002.

Mr Budde predicted a tough year ahead for mobile operators in the region, with revenue growth in this sector expected to fall from 10% in 2003 to 1% in 2004.

That would send shockwaves through the industry, he said.

"Hutchison's price competition is proving to be disruptive and others will have to adjust their pricing and marketing.

"Expect lower call charges in 2004. Expect fireworks from Vodafone."

Telecom reported its mobile customer connections were 282,000 at June 30, 2003, up 25.9% on the 224,000 recorded a year previously, although down from 307,000 connections at March 31, 2003.

"This reflects the strategy of focusing on higher value customers."

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