KEY POINTS:
New Zealand's second-largest phone and internet company, TelstraClear, has reported a $28 million loss.
It blames competitive pressures in the residential and small-business market.
When revenue charged for transtasman customers was included, the company went from a $10 million profit before interest and tax last year to a $28 million loss this year.
TelstraClear head of corporate services Mathew Bolland said he was not able to give a breakdown of the figures but the losses included the cost of shutting down its "Unplugged" mobile pilot in Tauranga.
"We're also in a market where unbundling has been announced and competitors are out there winning customers at any cost," Bolland said.
The company had been more successful in areas such as Wellington and Christchurch, where it ran its own network, he said.
Sol Trujillo, chief executive of Telstra, Australia's largest phone company, said New Zealand was the one place where he was not satisfied with the results. "We have not quite got to where we need to be."
Trujillo said retaining the New Zealand business was important for supporting its big transtasman customers.
But he believed the company could do better in the consumer area.
The regulatory climate in New Zealand was another issue.
"They have not yet opened up access as they have in Australia and the rest of the world, so we'll see how it evolves," Trujillo said.
He said the New Zealand management team was working to cut costs and using the Australian operations to support TelstraClear.
TelstraClear recently announced plans to move more than 100 operational roles to Australia.
Telstra, meanwhile, has reported that its 2007 net profit rose 2.9 per cent, helped by strong mobile and broadband sales.
But it gave a cautious outlook for 2008, sending its shares down 3.8 per cent.
The former Government-owned monopoly is in the midst of a costly five-year overhaul plan to reduce dependence on shrinking fixed-line revenue.
It is also battling the Government over funding awarded to rival Optus, owned by Singapore Telecom.
Telstra said it was being "prudent" in its guidance because of uncertainty about the regulatory outlook and Government policy.
It expected next year's earnings before interest and tax to rise 3 to 5 per cent.
That was well below some analysts' expectations.
"Probably the biggest disappointment is the outlook for 08," said ABN Amro Asset Management analyst Theo Maas.
"There is a wide range of estimates out there so it's not a surprise they could not reach the top of those expectations.
"But they seem to have been either very conservative - or very realistic, and then it's a big disappointment."
Investors seemed to agree, pushing Telstra shares down to close at A$4.52 ($5.14) on the ASX in a broader market that was up 0.4 per cent.
Telstra said it made a net profit of A$3.28 billion this year, up from A$3.18 billion last year.
Revenue was up 4.2 per cent.
Including a one-off charge, the profit was broadly in line with analysts' forecasts of a 5.7 per cent rise to A$3.36 billion.
It said costs associated with the overhaul plan would result in a "slight decline" in ebitda in the first half of 2008.
Telstra said ebit for this year, and excluding a one-off A$110 million write-off related to its Trading Post classifieds business, was 7.1 per cent, above its own forecast. Analysts suspect Trading Post is losing customers to auction house eBay.
For its second half, Telstra, said ebit was 42 per cent, above its forecast of 37 to 40 per cent.
It said this year was the heaviest for costs associated with its five-year overhaul, started in November 2005.
The company said on Thursday that the restructuring was "on time and on track".
It cut its workforce by 1887 over the year and by 5746 over the past two years.
"We are on course to achieve all our 2010 overhaul objectives," Trujillo said.
Telstra has said fixed-line revenue, now about 30 per cent of sales, will decline to about 20 per cent by 2010 as new business expands.
- additional reporting: NZPA
