Telecom quarterly earnings fall 37pc

Telecom reported a 36.8 per cent fall in first quarter net earnings to $103 million, with underlying earnings hit by higher regulatory costs and intensifying competition.

The company today said its adjusted earnings before interest, taxation, depreciation and amortisation (ebitda) was $443m for the three months to the end of September, down 0.9 per cent from a year earlier.

Revenue for the quarter fell 2.9 per cent to $1.32 billion, while expenses fell 4 per cent to $873m.

The year before first quarter bottom line figure had been affected by a one-off gain from a tax adjustment of about $58m, while the latest quarter included $20m of one-off gains from the sale of some Australian assets.

"Operational performance was satisfactory with good cost control offsetting significantly higher regulatory costs and intensifying competition," Telecom chief executive Paul Reynolds said.

Telecom absorbed $16m of new regulatory costs, and the impact of the Canterbury earthquake of around $3m.

During the quarter the sale of Australian arm AAPT's consumer business was completed.

"We remain on track to deliver an improvement in free cash flow as capex reduces in comparison to last year," Reynolds said.

"The New Zealand market continues to reflect the global trend of declining overall telecommunications revenues. Growth in services such as mobile, broadband and ICT is only partially offsetting declines in traditional fixed line and voice services.

"However, the rate of fixed access line loss and fixed to mobile substitution remains somewhat less in New Zealand than many overseas countries, probably reflecting the unusually wide availability of free local calling from Telecom," Reynolds said.

Telecom is paying a dividend of 3.5c per share for the first quarter, in line with a new dividend policy, and compared to 6cps last year.

- NZPA