Clear in the money after losing $30m

By RICHARD BRADDELL

Clear Communications says it is back in profit after revealing a $30 million loss for the March year.

Outgoing chief executive Tim Cullinane said the result, bad though it was, had been anticipated and agreed with owner British Telecom after it took full control of the company 18 months ago.

"We have taken the hard decisions and we are now starting to see the results," he said of a restructuring that has moved the company towards the business market which now accounts for 76 per cent of its revenues.

While declining to reveal the size of the latest June quarter profit, he said Clear was on a much more solid footing having squeezed out $15 million in annual costs. For example, the cost of servicing customer calls has dropped from $5.50 a call to $2.68, through changes in technology.

The annual result also included $17.5 million in one-off restructuring and Y2K costs.

Mr Cullinane said that profit in future was likely to be modest given Clear's investment intentions.

Turnover of $281 million was up from $274 million while shareholders' funds jumped to $273 million due to the release of capital from British Telecom as the company progresses its network upgrade and rollout.

However, Clear's transition from a voice to an electronic business oriented provider brings with it uncertainties, including the status of negotiations with Telecom over its interconnection agreement.

Telecom has cited its recent all-embracing interconnection deal with Telstra Saturn, under which most payments are zero-rated unless there is a significant imbalance, as being the likely template for the industry.

Interconnection negotiations with Telecom are continuing, but Cullinane said they were not likely to be completed by the August 31 deadline set by the two companies.

"We expect some slippage but both organisations can live with that if we can get in place an interconnection arrangement that makes sense for the two companies and the consumer." He said Clear wanted quite different things from Telstra Saturn, which was quite a different business.

A reason why the Telstra Saturn deal may not suit Clear is the huge success of its free internet provider, Zfree, whose business plan seems to depend on interconnection payments paid by Telecom to terminate traffic.

Zfree this week notched up its 150,000th customer. Mr Cullinane said that it was still in its growth phase and not likely to make a profit in the short-term, due to the heavy investment in network and other resources to support it.