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Vodafone NZ annual profit falls 16% as margins squeezed by rising device costs, wage bill

Tuesday 4th September 2018

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Vodafone New Zealand reported a 16 percent slide in annual profit as the country's biggest mobile carrier's margins were squeezed by more expensive handsets and content costs, and a bigger wage bill. 

Auckland-based Vodafone reported a profit of $39.9 million in the 12 months ended March 31 versus a restated $47.6 million a year earlier, financial statements lodged with the Companies Office show.

Revenue edged up 0.2 percent to $2.03 billion in a period when mobile customer numbers rose 3.2 percent to 2.56 million and broadband customer numbers increased 3,000 to 426,000. Earnings before interest, tax, depreciation and amortisation fell 5 percent to $403 million, lagging behind rival Spark New Zealand's 2.2 percent ebitda gain to $1.04 billion in the June year reported last month.

A proliferation of internet service providers as the government-sponsored fibre network gets rolled out has seen telecommunications firms compete more aggressively for customers, ceding margin for share. 

Vodafone's NZ accounts show its direct operating expenses - including the costs paid to other telecommunication operators for delivery of voice, message or data from Vodafone customers to other customers and device and other product costs -  were $944.6 million versus $941.9 million in the prior year.

Those costs also include wholesale access fees to Chorus and other network operators of $388.1 million versus $404.9 million in the prior year. 

Vodafone's device costs for handsets and modems rose 4 percent to $366.4 million, while other direct costs including content, managed services and regulatory fees increased 2.9 percent to $190.1 million. 

The mobile operator's wage bill rose 4.4 percent to $257.2 million, underpinning an increase in indirect operating costs such as IT and network maintenance, leases and advertising to $688.4 million from $659.5 million in the prior 12 months. Vodafone cut its outsourcing bill 15 percent to $28.6 million. 

Purchases of property, plant and equipment were also higher at $218.5 million versus $162.3 million in the prior year. That included purchase of TeamTalk's Farmside rural internet provider. 

Vodafone's depreciation and amortisation costs were $310.6 million versus $316 million in the prior year. 

The accounts don't mention Vodafone's joint venture with Vocus New Zealand to take advantage of the unbundling of the ultrafast broadband network in 2020, meaning the local fibre companies will have to let rivals access their fibre optic cables. The joint venture plans to buy fibre access at a wholesale price then repackage it for consumers to allow greater innovation for consumers. 

Vodafone's year-earlier numbers were restated to correct the timing of revenue recognition, and to adjust the estimate of rates used to capitalise certain overhead expenses, and to correct some errors, such as errors made in holiday pay calculations, among other factors. 


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