Interest keen in Telecom's return on operating costs

By ELLEN READ

The country's largest listed company opens its books this week for a first look at the 2005 financial year numbers.

Analysts are still tweaking their forecasts but expect Telecom to have made a net profit for the three months to September similar to last year's $162 million.

All will be revealed on Friday and, while Telecom often acts as a bellwether stock for the wider market, limited reaction is likely as it's only a three-month figure.

Jeremy Simpson of Forsyth Barr said Telecom's fourth-quarter results showed operating costs had increased quite significantly, so people will look to this week's numbers for signs of money well spent.

"They were spending a lot of money trying to grow mobile subscribers and broadband subscribers.

"People will be watching to see what kind of growth they got out of those businesses and what's happening with the cost lines."

Simpson is expecting solid performances from broadband, internet and mobile data revenues offset by declining national calling revenue.

Telecom has already said the present financial year's final figure will be flat at the operating costs level but the gains will be made from lower depreciation and interest costs, Simpson said.

The company reported net earnings after tax for the year to June 30 of $754 million.

More generally, the stockmarket will be getting to grips with last week's signalling of an end of the interest rate-tightening cycle and what this means for local equities.

The Reserve Bank raised its official cash rate to 6.50 per cent last week.

Governor Alan Bollard suggested that further increases were not needed.

First NZ Capital strategist Jason Wong said mildly restrictive monetary policy represented "a slight negative for the [equities] market that is likely to persist for some time".