Reynolds: Telecom's profits down but making progress

Telecom chief executive Paul Reynolds. Photo / Glenn Jeffrey.

Telecom says its quarterly results are "solid" but tough economic times and problems with its XT network will see its profits in the lower range of expectation for the full financial year.

Telecom, the country's major telecommunications company, announced its results for the three months to December today.

Profit of $80 million was 23.8 per cent down on the $105m for the same quarter the previous year but its earnings of $425m, before interest, taxation depreciation and amortisation, were up 1.7 per cent and in line with guidance.

While adjusted revenue for the half year fell by 6.5 per cent on the equivalent half in the previous financial year, to $2.67 billion, adjusted operating expenses fell faster, to $1.8b, an 8.9 per cent decrease on the equivalent half year.

Guidance for adjusted group net earnings is $400m to $440m for the full financial year. However, earnings were expected to be in the bottom half of the range thanks to the economic downturn and much publicised problems with the failure of its XT network, the company said.

Shares in Telecom gained 1c to 232 when the stock exchange opened this morning.

Telecom estimated the slowdown in the New Zealand economy cost it $10m during the quarter and $20m for the half year.

Nevertheless, the quarter saw progress on a range of fronts, including the addition of 60,000 customers in mobile, Telecom Retail attracting 64 per cent of new customers to broadband, reduced losses of fixed line customers and the success of the cost out programme, said chief executive Paul Reynolds.

The XT mobile network grew during the quarter to 467,000 connections.

Fifty-seven per cent the connections were postpaid, and 47 per cent were new acquisitions. The quarter saw average data revenues per user increase 19 per cent and roaming revenues increase 111 per cent when compared to the same quarter in the previous year, he said.

However, the figures do not include January and any indication of how many customers Telecom may have lost when the mobile network went down.

"A strong focus for XT is to restore customer confidence," Reynolds said, and the company was working to improve the reliability of the network.

Fixed broadband market growth slowed, but the total market has now passed the 1 million connection mark, said Reynolds.

Telecom Retail held its market share at 57 per cent but reported earnings of $82m for the quarter, a 7.9 per cent decline on the equivalent quarter last year.

However, the good news came from Telecom's technology company, Gen-i, which reported earnings of $60m for the quarter, 9.1 per cent up on the equivalent quarter last year.

"Gen-i's increase in EBITDA was driven by IT Solutions growth, strong performance from our Australian business, and a focus on lowering costs," said Gen-i chief executive Chris Quin.

Telecom's network arm Chorus reported earnings of $186m for the quarter, a flat result compared with the equivalent quarter last year. Chorus said 970,000 customers were able to access fixed line broadband at speeds of 10Mbps or higher.

Wholesale and International reported earnings of $62m for the quarter, a 1.6 per cent decrease on the equivalent quarter last year.

Telecom's Australian venture, AAPT, reported earnings of $28m for the quarter, flat on the equivalent quarter last year.

A second quarter dividend of 6 cents per share has been declared, with no imputation credits.

- NZPA