NZ Telecom 2Q Net Falls, But Mobile Ops Score Big"
WELLINGTON (Dow Jones)--Telecom Corp. of New Zealand (TEL.NZ) Friday posted a lower second-quarter net profit, but its mobile phone business outperformed U.K. rival Vodafone Group PLC. (VOD.LN).
The country's biggest fixed-line phone concern and largest listed company posted second-quarter net profit of NZ$198 million, compared with NZ$203 million in the year-ago period, but above analysts' forecast of NZ$193 million.
On a like-for-like basis, net profit for the quarter was up at NZ$193 million from NZ$175 million the previous year, the company said in a statement to the stock exchange. The previous year included a gain of NZ$28 million from the sale of Telecom's 12% stake in Sky Network Television Ltd. (SKY.NZ), while the latest quarter had a NZ$5 million gain from the issue of convertible notes.
Second quarter earnings before interest, tax, depreciation and amortization, or EBITDA, were NZ$551 million, down from NZ$562 million a year earlier and below the NZ$563 million forecast by analysts.
The result "confirms what we have been expecting - it's a good yielder achieving modest growth," said Barry Lindsay, research director at First NZ Capital.
Earnings growth at Telecom has slowed in recent quarters because of falling revenue from its traditionally strong fixed-line calling business and rising expenses from building new growth platforms such as high-speed Internet services aimed at fending off competition.
Nonetheless, the highlight of the second-quarter result was Telecom's performance in its mobile phone operations. It added a net 96,000 subscribers in the second quarter, up from just 15,000 in the first quarter and ahead of Vodafone's 74,000 additional subscribers in the December quarter - the first time in several years it has topped its U.K. rival in subscriber growth.
"I think the mobile subscriber growth was well above where people were expecting; it's certainly the highlight," said James Lindsay, a fund manager at Tyndall Investment Management.
Doubts On Special Dividends
Telecom Chief Executive Theresa Gattung was equally upbeat on the performance of the mobile operations, saying in a statement it was "one of the strongest quarters ever."
"Mobile revenues were up significantly, building on the momentum from growth in recent quarters," she said.
Second-quarter sales in its New Zealand mobile phone business rose 18.5% to NZ$179 million from NZ$151 million the previous year, with monthly average revenue per customer rising 1.2% to NZ$51.60.
But Tyndall Investment's Lindsay said Telecom can't afford to remain complacent given Vodafone's record of coming back strongly when it had lagged in subscriber growth. In fact, Vodafone is comfortably ahead in the mobile market share stakes, capturing over 56%, with the balance held by Telecom.
Telecom shares gained 1% to NZ$6.22 by 2240 GMT.
A second-quarter dividend with full tax credits of 9.5 cents a share was declared, unchanged from the first quarter and up from 5 cents a share the previous year.
The company didn't comment on potential special dividend payments, which analysts say Telecom will likely be able to start paying toward the end of the current fiscal year.
However, First NZ Capital's Lindsay said Telecom's upward revision to its current fiscal year capital expenditure forecast to NZ$700 million from NZ$650 million may raise some doubts about payment of special dividends.
"It maybe just raises a question as to whether they will occur," he said.
Chief executive Gattung said lower calling revenue was offset by strong revenue growth in mobile phone business, broadband and lower net interest due to reduced debt levels and lower depreciation.
Second-quarter sales in New Zealand, which makes up 75% of group sales, rose 9.7% on year to NZ$1.06 billion, helped by the acquisition of IT solutions companies Computerland NZ Ltd. and Gen-i last year.
Gattung also said the company's Australian business "continued to make steady progress." "However, she said, the business market remains highly competitive."
Second-quarter EBITDA in Australia fell to NZ$44 million from NZ$47 million the previous year. Australian revenue declined 5% to NZ$359 million from NZ$378 million the previous year.
Telecom said it remains comfortable with market consensus for a fiscal-year net profit of NZ$816 million.
-By Shri Navaratnam, Dow Jones Newswires; 64-4-471-5990; shri.navaratnam@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 4th February 2005
