KEY POINTS:
Friday morning, 10am - at Telecom's Auckland head office chief executive Paul Reynolds begins briefing a small gathering of journalists and analysts. The message: challenging times but a pretty good result, in line with market guidance.
Meanwhile, out in the real world, the stock exchange is opening. The
message: It's a shocker. Sell. Sell. Sell.
The disconnect between the Telecom view of yesterday's numbers and the market's view will have served as a blunt reminder to Reynolds and his team of the challenge they face to win back investor confidence.
Telecom ended the day some half a billion dollars less valuable than when it started. Ultimately the damage was a drop of 7.6 per cent - although at one point it was as much as 10.5 per cent.
It was still the biggest single day fall since May 2006 when the market learned of Government plans to regulate Telecom's monopoly. Telecom shed 48c on May 5, 2006 and another 33c on May 6. It has never recovered from those two dark days.
To be fair the 2008 result was in line with expectations, as was the ebitda (operating profit) forecast for the 2009 year. But a number of other details unnerved investors.
For example dividend payments will fall to 6c a share in the first three quarters of fiscal 2009, compared with 7c a year earlier. And 2009 dividends will no longer come with tax credits. There were no guarantees that tax credits would be returned for the 2010 dividend, Telecom said.
Net profit forecasts for 2009 were significantly down on what analysts had been picking. The forecast was for between $500 million and $540 million in the 2009 year. Analysts had expected a profit figure of about $590 million.
Perhaps more ominous was Reynolds' honest appraisal that competition in the telco sector will keep prices low for the next three years - great news for consumers. But for Telecom that will combine with a rise in costs (related to building new mobile and broadband networks) which will put extreme pressure on margins.
Chairman Wayne Boyd offered the reassurance that the company will return to profit growth in the "not too distant future".
In the current cash strapped investment environment the "not too distant future" must seem like a lifetime away to some shareholders - including some of the big institutions.
In the end there were some bargain hunters who came to the rescue before the stock managed to touch a new low for the year. They were either in a position to take a punt on the long-term future of the company - or just playing volatility of the market.
There is a case for arguing that yesterday's sell-off was overdone. But Reynolds and his team understand what has gone wrong with this business.
They did their best to put a brave face on the numbers yesterday morning. They pitched things in a manner which they hoped would not spark investor panic.
Based on one day's trading they didn't succeed. But one day's trading doesn't change anything about the task in front of them. At least this management regime is prepared to confront the problems - even if they do confront them with a smile.
* Liam Dann is the Herald's business editor.