KEY POINTS:
Telecom is set to post almost flat quarterly profits this Thursday, but the focus will be on the size of an expected cash return to shareholders after the sale of the Yellow Pages.
Analysts expect a capital return through a share buyback of between $1 billion and $1.5 billion after the $2.24 billion sale of the directories group last month.
"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 $225 million in the third quarter, compared with $222 million 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.
While Telecom has already said it will make a sizeable capital return, it also has plenty of options for spending any spare Yellow Pages cash.
It 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 that the Government has accused the company 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 closed at $4.79 on Friday, after hitting a 13-year low of $3.93 last August. 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 its network to competitors and split into three separate operating units.
- REUTERS
