Telecom profit falls 44pc to $398m

Telecom reported a 43.9 per cent fall in full year net profit to $398 million.

Adjusted revenue for the year to June 30 dropped 2 per cent on the prior year, to $5.58 billion, while adjusted expenses were $3.82 billion, a 1 per cent increase on the prior year.

The decline in revenue was primarily driven by declines in its retail division and the Australian AAPT, which were offset by growth in its wholesale and international operations, Telecom said today.

Adjusted earnings before interest, taxation depreciation and amortisation (ebitda) of $1.77b were in line with guidance and a 6.5 per cent decline on the prior year.

Telecom said it was maintaining its guidance for adjusted operating earnings in the 2010 financial year to a range between a fall of 1 per cent and a gain of 2 per cent, compared to 2009, subject to potential risks arising from the economic downturn.

A fourth quarter dividend of 6c a share was declared, compared to 8c last year.

Telecom highlighted an adjusted net earnings figure, which fell 32 per cent to $483m.

That was due to a combination of a 20 per cent rise in depreciation and amortisation costs, and a 32 per cent increase in net finance expenses. Those increases were partially offset by a 37 per cent fall in adjusted income tax expense.

Adjustments included an impairment charge of $68m to write-off the carrying value of goodwill held relating to the acquisition of PowerTel, and a $33m impairment charge relating to mobile network equipment as a result of the launch of the XT Mobile Network, both in the second quarter.

In the fourth quarter a $12m gain relating the sale of an undersea cable was also recognised.

In the fourth quarter net earnings fell 55.7 per cent, from a year earlier, to $78m. On an adjusted basis fourth quarter net earnings fell 60.3 per cent to $70m.

Telecom chief executive Paul Reynolds said the company had made significant operational and service improvements on a broad range of fronts in what was a big year for Telecom.

The XT Mobile Network was launched and significant progress made on the rollout of fibre-to-the-node broadband.

Expenses growth was driven partly by increased staffing levels to meet additional client demand in Gen-i and the establishment of Chorus as a separate business unit, as well as salary inflation.

A focus on labour cost control had resulted in labour costs reducing in the fourth quarter.

In the mobile market, connections declined by 26,000 over the fourth quarter, Telecom said.

That was due to subdued activity before the May 29 launch of XT mobile. In the last month, after the launch, connections growth was strong.

The XT network's impact would become apparent in the next quarter's results, but Telecom nevertheless had 165,000 customers on XT by August 14, said Reynolds.

Positive early average usage trends were seen, such as a 20 per cent rise in voice traffic, and a 300 per cent increase in data download traffic compared to Telecom's CDMA network.

Growth in the fixed broadband market was somewhat slower towards the year end partly due to increased market penetration.

Telecom Retail's share of net broadband connection growth was 44 per cent, with its overall share of broadband connections at 57 per cent.

At Telecom Retail, ebitda was down 6 per cent in the fourth quarter to $180m when compared to the equivalent quarter in the prior year.

GEN-i had a 15 per cent fall in ebitda in the latest quarter to $107m. The quarter saw $446m in client contracts closed, bringing the total to $1.2b for the year to date.

At Chorus ebitda was up 2 per cent to $140m in the fourth quarter.

Chorus chief executive Mark Ratcliffe said 780 cabinets were installed by the end of the quarter, meaning more than 160,000 customers now have access to fibre-to-the-node services.

The Wholesale and International unit had a 20 per cent fall in fourth quarter ebitda to $101m compared to the equivalent quarter in the prior year.

That reflected pricing changes, increased costs from operational separation and some one-off items.

At Australian unit AAPT ebitda lifted 10 per cent to A$22m ($27.4m) in the fourth quarter.

- NZPA