TelstraClear still set on upgrading

TelstraClear's profits are shrinking but the company is unfazed, saying it is still on track to take on Telecom.

Company earnings slipped from $160 million to $154 million in the year to June 2006 while capital expenditure jumped from $125 million to $141 million.

The results emerged as its Australian parent company, Telstra, reported a 26.2 per cent decrease in net profit to $3 billion for the year, soon after its decision to drop its $4 billion fibre-to- the-node internet project.

TelstraClear spokesman Matthew Bolland said this would not impact on support for TelstraClear's plan to be a strong competitor to Telecom.

"We have had strong ongoing support for some time and there has been no change in that level of support ... You are looking at a company that is trying to make a significant step into a market that is opening and we have spent the last year building capability to reach a lot more customers," he said.

TelstraClear's slide in profits was driven by its $20 million investment in building a South Island fibre network.

It plans to increase investment in upgrading Wellington and Christchurch customers to digital TV, upgrading the capacity of the national network and to roll out its $50 million investment in a new voice, mobile and broadband service in Tauranga.

Revenues jumped by $11 million to $727 million, driven by an increase in its in-home calling plans - the service it offers reselling Telecom's home phone lines, introduced 18 months ago.

"It is not a high-margin service. We only get 2 per cent on it, but we bundle it with tolls," said Bolland.

"We have implemented changes following our strategic review, invested heavily in systems and processes that will position us well for the future and continue to grow revenue."