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More on Telecom result

NZPA

Friday 11th February 2011

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Telecom is reporting a 0.5% fall in adjusted half year earnings before interest, tax, depreciation and amortisation (ebitda) to $868 million.

Adjusted revenue for the six months to the end of December was down 3.3% from a year earlier to $2.58 billion, while adjusted net earnings fell 35% to $158m.

Adjusted expenses, at $1.72b, decreased by 4.7%, reflecting lower mobile cost of sales and ongoing efficiency improvements, the company said today.

Telecom chief executive Paul Reynolds said a continued strong focus on operational excellence and cost control had helped offset increased tax and ongoing regulatory impacts.

Telecom remained on track to deliver its full year earnings guidance and had improved the capital spending outlook, now expecting full year capex to be within the $950m -- $1b range for the financial year, down from $1b to $1.1b indicated previously.

The XT mobile network continued to grow strongly and Telecom now had more than one million customers on XT, representing around 45% of its total mobile base, and 71% of its mobile revenue, Dr Reynolds said.

The tax expense of $87m in the latest half year was $53m higher than a year earlier, mainly due to the impact of changes in tax legislation, the company said.

The XT customer base rose to 1.01m connections at December 31, 298,000 more than on June 30.

For the 2011 financial year, Telecom is targeting a payout ratio of 90% of adjusted net earnings. In accordance with that policy, a second quarter dividend of 3.5c per share was declared.

Telecom reported a bottom line net profit of $164m for the half year, down 32.2% from a year earlier, on revenue down 2.6% to $2.6b.

Telecom full year adjusted net earnings guidance of $330m to $370m, does not reflect any impact from the Government's ultra-fast broadband initiative, which the company said was "likely to reshape the industry".

In mid-December, government agency Crown Fibre Holdings said Telecom had been chosen to take part in prioritised negotiations for the $1.5b ultra-fast initiative in much of the country.

Last week, the Government said it had started commercial negotiations with Telecom and Vodafone to provide improved rural broadband services, after the two companies submitted a joint proposal for the $285m rural broadband initiative.

Telecom's network unit Chorus reported a $6m rise in ebitda to $391m for the half year, which the company said now had one year and fewer than 1000 cabinets to go in its nationwide fibre-to-the-node programme.

The Wholesale and International operations had a 57.8% fall in half year ebitda to $46m.

Telecom Wholesale acting chief executive Nick Clarke said wholesale external ebitda rose 9%, but fully-traded ebitda was down due to internal cost allocations, a changing product mix and broadband repricing.

Strong access and broadband connection growth continued, including 28,000 new access connections and 30,000 new broadband connections in the half year.

Telecom Retail, which provides fixed line, mobile and internet services to consumers and small and medium businesses, reported a 36% rise in half year ebitda to $240m.

The increase in ebitda reflected lower mobile cost of sales, a focus on removing cost from the business and improved broadband pricing from Wholesale, Telecom retail chief executive Alan Gourdie said.

Gen-i, which provides telecommunications for business customers, saw ebitda rise 6.1% to $105m driven by IT services growth, decreasing overhead costs and decreasing internal costs, which were falling in line with external telco revenues.

Mobile connections continued to grow, by around 5% in the first half of the year, and voice and data revenues also improved, up 5% , Gen-i chief executive Chris Quin said.

Australian subsidiary AAPT reported adjusted ebitda of $A38m for the first half, affected by Telstra's renegotiated wholesale terms which reflected reduced volumes and the sale of the Consumer business, partially offset by lower operating expenses, Telecom said.

 



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