KEY POINTS:
Telecom today confirmed that it intends to sell off its Yellow Pages directory group.
Analysts believed the sale could fetch around $1.5 billion which would open the way for a combination of a substantial special dividend, share buybacks and debt repayment.
The announcement was made when the sharemarket's leading stock delivered its first quarter result today.
The telco said its first quarter profit rose 12 per cent to $224 million from $199m last year. That included a $20m one-off gain from the sale of Telecom Samoa Cellular.
It said it would pay a fully imputed dividend of 7 cents per share on December 8, down from 9.5 cents a year ago.
Telecom has said it had to cut dividend payouts so it could reinvest to cope with the Government forcing it to open its network to rivals.
It would pay 75 per cent of net profit, excluding one-offs, in dividends.
There would be a competitive sale process for Yellow Pages, which was experiencing double digit revenue growth, and chief executive Theresa Gattung said there had already been considerable interest shown based on recent media speculation.
"We expect that the sale should be completed by the end of this financial year," she said.
Ms Gattung hinted at a cash return, saying, the company would "provide an update on its capital management plans after any sale had been completed".
Telecom's troubled Australian unit, AAPT, which had an A$8m ($9.3m) operating loss, had made new wholesale agreements with PowerTel and Telstra.
She said there had been a strong revenue performance by New Zealand business with growth in broadband, mobile and Yellow Pages Group revenues.
Access and calling revenues that have been a long downtrend had stabilised while there was growth in new and emerging parts of the business offsetting declines in traditional areas.
Operating revenue rose 3.3 per cent to $1.48b.
Earnings before interest and tax rose 6.9 per cent to $388m.
Adjusted earnings per share rose 2.0 per cent to 10.4 cents.
Mobile revenues grew 7.4 per cent while costs fell. Connections grew a "very pleasing" 66,000 in the quarter.
She said the company was on track to roll out faster mobile broadband technology starting in Auckland before Christmas.
Telecom's converged mobile and fixed calling offer had proved popular, with 66,000 mobiles using it.
She said the company was well on track to reach its target of 520,000 retail broadband (fixed and mobile) connections by the June 30, 2007.
A decline in revenue from business broadband reflected the drop in business prices to align with residential broadband. She said there was an increasing trend towards wireless broadband.
Ms Gattung said the Australian market continued to remain "challenging", however the new, comprehensive network access agreement that AAPT had struck with Australian network operator PowerTel was a major boost and the benefits of this would start to from the next financial year.
The deal, which would significantly lower AAPT's costs, gave customers access to high speed internet.
New Zealand operating revenue rose 1.7 per cent. Higher operating revenues for calling, mobile and directories were partly offset by declines in interconnection, data, dial-up internet and IT services revenues.
Interconnection revenue, which includes termination of calls on both fixed and mobile networks, fell 7.3 per cent to $38m reflecting lower mobile termination rates, an area the Commerce Commission has taken an intense interest in.
Broadband revenue increased 4.8 per cent to $66m with residential revenue increased by 32 per cent to $33m, driven by strong uptake from customers.
Total IT revenue fell 9 per cent to $85m although Telecom still expects a strong full year performance.
AAPT revenue fell 1.7 per cent to A$292m ($340m) but its operating loss was a 33 per cent improvement on last year.
Australian operations were affected by a tightening of wholesale prices and continued downward pressure on retail prices.
Capital expenditure increased by 9.4 per cent to $174m and for the full year the company plans to spend $800m.
Telecom's share, smashed down around a third in May after the Government announced it would Telecom force to open its networks, have been recovering strongly in the last month, although it slumped 15 cents to $4.52 yesterday in a weak market. Until then it had lifted 19 per cent from a nadir of $3.93 on August 21.
- NZPA
