KEY POINTS:
Telecom Corp is set to post almost flat quarterly profits, but the focus is on the size of an expected cash return to shareholders after the sale of its directories arm.
Analysts expect a capital return through a share buyback of between $1 billion and $1.5 billion, following the $2.24 billion sale of its Yellow Pages group in March.
"The underlying result is going to be secondary, the issues are going to be the magnitude of the capital return, and any further update on the structural separation," said Morgan Stanley analyst Sachin Gupta.
Telecom is expected to report a net profit after tax of $225m in the third quarter, compared with $222m a year ago, according to five analysts polled by Reuters.
Investors will also be looking for any news of a chief executive to replace Theresa Gattung, who will stand down at the end of the financial year in June. Chief Financial Officer Marko Bogoievski is favoured by many as the logical choice for CEO.
While Telecom has already said it would make a sizeable capital return, it also has plenty of options as to where it could spend any spare Yellow Pages cash.
Telecom could invest further in New Zealand fixed-line infrastructure, its Australian operations, or retire debt. It is also considering spending hundreds of millions of dollars on a new mobile phone network.
Analysts favour a share buyback over a special dividend, because it improves Telecom's earnings per share and it is seen as a more politically sensitive move, given the government has accused Telecom of paying large dividends while underinvesting in infrastructure.
Telecom has just over 2 billion shares, and a market value of $9.6 billion.
Telecom's shares last traded at $4.77, after hitting a 13 year low of $3.93 in August last year. They were trading at $5.65 before the government announced wide-ranging market reforms last May.
The country's largest listed company and a former state-owned monopoly, Telecom has been ordered by the government to open up its network to competitors and split into three separate operating units.
On April 13, Telecom floated the idea of selling off its copper phone line network as a way of bypassing regulation. It has estimated complying with the regulation will cost it $330m, with ongoing costs of $40m a year.
- REUTERS
