Telecom New Zealand Fill Year Profits Down by One Third

Telecom New Zealand has announced a one-third drop in its full year net profits to NZ$483 million (US$326 million) - which the company put down to a combination of a 20% increase in depreciation and amortisation costs, and a 32% increase in net finance expenses. These increases were partially offset by a 37% decrease in adjusted income tax expense.

Revenue for the year dropped 2% on the prior year, to NZ$5.6 billion (US$3.8 billion), while adjusted expenses were NZ$3.8 billion (US$2.6 billion), a 1% increase on the prior year. The decline in revenue was primarily driven by declines in Retail and AAPT which were offset by growth in Wholesale and International.

In the fourth quarter, net income was down by 60% at NZ$70 million compared to NZ$175 million a year ago. Revenues dropped by 7% to NZ$1.35 billion.

"This was a big year for Telecom in which we made significant operational and service improvements on a broad range of fronts. Telecom is getting it right as we invest and re-build with the aim of returning to earnings growth," said Paul Reynolds, CEO, Telecom. "We improved customer service and public perception, and made huge strides in improving our infrastructure, as exemplified by the successful launch of the XT Mobile Network and significant progress in the roll-out of fibre-to-the-node broadband. These world-class networks form impressive platforms on which to grow and to secure the long-term health of the business."

Telecom's WCDMA based XT Mobile Network was launched on 29 May 2009. Although there was a decline of 26,000 connections over the quarter due to subdued activity prior to the launch of XT, after launch Telecom says that it saw strong connections growth in the last month.

"The launch of the XT Mobile Network was a remarkable achievement and surpassed our expectations," said Dr Reynolds. "Its impact will become apparent in the next quarter's results, but we nevertheless had 165,000 customers on XT by 14 August, showing positive early average usage trends, such as a 20% increase in voice traffic, and a 300% increase in data download traffic compared to our CDMA network."

Telecom is maintaining its guidance for Adjusted EBITDA in FY10 to be -1% to +2% compared with FY09, subject to potential risks arising from the economic downturn.

Posted to the site on 21st August 2009