Telecom earnings 'on track' on verge of mobile network launch

Telecom reported third quarter figures it described as "on track", as it prepares to launch its half billion dollar-plus bid for larger mobile earnings.

The company said net profits for the nine months to the end of March fell 40 per cent from a year earlier to $322 million.

For the March quarter net profit rose 14 per cent from a year earlier to $159m, while revenue lifted 1 per cent to $1.4b.

Chief financial officer Russ Houlden said the $40m in dividends received from the Southern Cross telecommunications cable in the third quarter was higher than expected.

The improved performance in the March quarter was also partly attributed to lower mobile cost of sales ahead of the launch of Telecom's new XT mobile network.

Houlden preferred to focus on adjusted results which took into account two impairment charges totalling $101m in the second quarter.

On that basis, adjusted nine month net earnings down 23 per cent to $413m were in line with full year guidance of $460-$500m, he said.

That was partly because Telecom did not anticipate another Southern Cross dividend in the fourth quarter.

Over-riding discussion about the latest performance was the imminent launch of Telecom's new XT mobile network, on which the company said previously it had invested $574m over a two-year period.

The network gained attention this week as rival Vodafone initially sought an injunction to delay the launch, arguing emissions from Telecom's new transmitters while they were being trialled had caused dropped calls and difficulty making calls on the Vodafone network.

But before the court could announce a decision, the two companies said they had reached a solution in which Telecom had agreed to install filters on more cell sites.

Telecom chief executive Paul Reynolds regularly referred today to the benefits of the new network.

The XT network hit all key points that customers wanted to buy, he said.

"So we're going to get more data revenue, we're going to get more customers who want these high value services, and we're going to get more roaming. That's the basis of the plan."

Telecom would be adding to its ARPU (average revenue per user) through increased data revenues "because people are going to be buying these PDAs (personal digital assistants) with great screens which you can browse the internet, you can do your social networking, you can connect with the office."

The other key aspect for Telecom was participation in inbound roaming, which was a big revenue pool in New Zealand, in a much more significant way than it had in the past.

He did not expect the competition for the mobile market to be "a massive price game, but I do expect it to be an intense marketing game".

Telecom shares were down 10c to $2.72 in mid-afternoon in a falling market, after having generally trended up from $2.24 at the start of April.

- NZPA