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Telecom to spend $574m on 3G mobile service

Wednesday 15th October 2008

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Telecom, the biggest company on the NZX 50 Index, plans to spend NZ$574 million over two years on high-speed mobile services, reaching 97% of New Zealanders by June 2009.

The investment will allow Telecom to beat Vodafone in deployment of 3G services by about a year, according to a statement from Telecom today. Its total capital spending in the next two years will be about NZ$2.4 billion, it said.

Shares of the phone company sunk 5% to a 16-year low NZ$2.44. In the past decade, the stock has handed investors a loss of more than 60% excluding dividend payments. The slide began when it slashed dividends for its unprofitable expansion to Australia and accelerated after New Zealand's government imposed an operational split.

Of 12 analysts who follow the stock, eight rate it a "hold" and two expect the shares to outperform the benchmark index, according to Reuters. The other two ratings are a "sell" and an "underperform."

Telecom has forecast little profit growth the next few years. Pretax earnings may slide 5.7% between 2009 and 2010, according to Reuters estimates.

By Jonathan Underhill

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