Telecom cuts capital expenditure but UFB not in sums

Telecom CEO Paul Reynolds. Photo / Richard Robinson

Telecom announced more spending cuts yesterday but kept ultra-fast broadband out of financial forecasts.

In a quarterly-trading update, Telecom CEO Paul Reynolds said capital expenditure this year would be between $900 and $930 million, below earlier forecasts of $1 billion.

The company also plans to lower capital expenditure to $750 million next year, a year ahead of schedule.

Reynolds said the reductions were the result of tightly focused spending but he stressed the company was not cutting corners.

First NZ Capital's Greg Main said Telecom's high capital expenditure had been a sore point with investors.

"[Telecom] had a very high capital expenditure bill but their earnings have been flat. Why would you invest a billion dollars in a business with earnings going flat and you've got all this financial uncertainty?"

Main said the Government's ultra-fast broadband scheme was still the big unknown in planned spending.

"If Telecom is involved, how much capex will they put into that?"

Telecom is vying to be the Government's major private partner in the broadband build and, if successful, will lay fibre internet cables throughout New Zealand.

While buoyant about slashing spending, Reynolds warned revenue growth would be slow until 2014, suggesting the market would grow by only 1 per cent.

But he said the company gained 6000 on-account customers over the quarter, a small win but reversing decline of customer numbers.

He said the total users on Telecom's XT network had grown to 1.1 million, representing 51 per cent of customers and 77 per cent of Telecom's mobile revenue.

And Telecom's information and technology arm Gen-i had signed a huge three-year contract with Fletcher Building.

Telecom dividend for the quarter is 3.5c per share. Shares closed up 3c yesterday at $2.21.5.