Fibre prospects loom large over Telecom results

Telecom's future structure depends on the Government's broadband decision. Photo / Thinkstock

Fibre will be in focus when Telecom announces its half-yearly results this Friday with analysts predicting a slump in net profits.

Telecom is the frontrunner in bids to build the Government's ultra fast broadband scheme in 25 regions, including the lucrative Auckland market.

"Questions will be centred around UFB but there won't be any answers so it will come back to the operating performance because the company's not at liberty to say a great deal, unless there has been some announcements in the interim," said Geoff Zame from Craig's Investment partners.

The results report on the period June 10, 2010 to January 10.

As well as UFB, Rosalie Nelson from IDC said the breakdown of the costs incurred by each of Telecom's business units will be of interest.

This is important because the retail arm of Telecom will split and become a separate entity from its network arm (Chorus) if the telco wins the broadband tender. Telecom relies heavily on Chorus to bring in revenue.

"They're looking to really streamline their cost base and the reason that becomes so important is that when we start to look at the separation of the business and taking retail away from the cash-flow of the network, you realise they've got to move to a significantly lower cost-structure [for retail] to become viable as a standalone business," she said.

Guy Hallwright at Forsyth Barr predicted Telecom's revenue will be down 5.7 per cent on the same period the year before.

He predicted earnings before interest tax and depreciation (EBITA) will be up only 0.8 per cent to $879 million.

Zame believed both revenue and EBITA will be flat with the later sitting at $866 million, down half a per cent.

Greg Main from First NZ Capital predicted half yearly revenue would be down 4.5 per cent, to $2.5 billion and EBITA to sit at $874 million.

All three predicted a fall in net profits after tax (NPAT), with Hallwright forseeing a fall of 16.1 per cent to $203 million and Zame a slump to $164 million.