Telecom reports half-year loss, writes down Aussie ops

Theresa Gattung

Telecom has reported a net loss of $466 million for the half year to December, after slashing the value of its Australian operations.

Telecom wrote down the value of its Australian business by $897 million.

Telecom said the carrying value of the Australian business had been reduced from A$1.464 billion ($1.62 billion) to A$628 million, based on revised future cash flow forecasts.

Adjusted net earnings for the period were $395 million, compared with $398 million for the same period the previous year.

Telecom will pay a fully imputed ordinary dividend for the December quarter of 9.5 cents per share, as well as a fully imputed special dividend of 5 cents per share.

Revenue for the period was up 2 per cent to $2.85 billion.

Operating revenue for New Zealand rose 5.4 per cent to $2.245 billion. Telecom said higher revenues for mobile, data, broadband and internet were partly offset by falling revenue for traditional services such as local services and calling revenues.

Operating revenue in Australia fell 8.5 per cent to A$599 million.

Telecom chief executive Theresa Gattung said the New Zealand business performed strongly in most areas.

She said mobile connection growth was strong in the quarter, with 135,000 new connections.

Telecom picked up 38,000 new broadband customers in the quarter, about 35,000 of which were residential.

Ms Gattung said the write-down of AAPT, which the market had been warned about, reflected a difficult trading environment in Australia.

But she said Telecom remained positive about investments it had made at AAPT and expected these to "materially impact performance" in the next financial year and beyond.

Telecom is about to embark on a review of the Australian business with a view to perhaps selling, or bringing in a partner.

Capital expenditure increased by $37 million to $354 million for the half year, with increases across the whole business except International and Wireless.

Telecom said it expected total capital expenditure of about $750 million for the full year.

The results included a one off gain of $60 million on the acquisition of a subsidiary company of Southern Cross Cables.

Telecom bought the company, which holds tax assets valued at $70 million, for $10 million.

Shares in Telecom last traded yesterday at $5.66.

Hamilton, Hindin, Greene partner Grant Williamson said some of Telecom's numbers were impressive.

"Not so much the financials, but the mobile and broadband numbers. Both have surprised on the upside very nicely."

Mr Williamson said the huge write-down for the Australian operations was expected, but disappointing.

"That's really where most of Telecom's uncertainty lies, is in the Australian operations. Analysts will continue to badger management until they get an answer on what Telecom are going to do," Mr Williamson said.

He said positives for investors were management's optimism about the New Zealand operations, and the fact Telecom had maintained its dividend policy.

- NZPA