Expenses taking a toll on Telecom

Anyone holding out hopes for an immediate solution to Telecom's underperforming Australian business, AAPT, as it announces its first quarter figures this week, will probably be disappointed.

Telecom said it has been approached by more than one player over AAPT but no firm proposals have been put on the table. It remains open to approaches but has no plans to withdraw from Australia.

Meanwhile, increased promotion and marketing expenses are likely to curtail Telecom's first quarter operating profit, due on Friday, analysts said.

The market is looking at earnings before interest, tax, depreciation and amortisation of about $543 million for the quarter, down from $554 million a year ago.

But expectations are for a net profit after tax of $197 million for the quarter, up from $193 million in the same quarter of 2004.

Analysts said Telecom should have no problem meeting its target of 250,000 broad-band subscribers by December.

Forsyth Barr analyst Jeremy Simpson said he expected continued strong growth across most of Telecom's businesses. "But that is going to continue to be offset by sharp increases in expenses with the growth in mobile and broadband customers," he said.

- REUTERS