AAPT doing it tough, says Telecom NZ

Stuart Corner
Friday, 02 February 2007 04:42

IT Industry - Deals

Telecom New Zealand has reported net earnings of $NZ452 million for the half year ended 31 December 2006, compared to a net loss of $NZ466 million for the half year ended 31 December 2005: EBITDA for its Australian operations fell significantly.

Excluding the impact of abnormal items, which affected the results in both periods, net earnings for HY 2006-07 were $NZ461 million, an increase of 16.7 percent on adjusted earnings for HY 2005-06 of $NZ395 million.

EBITDA for Australian operations, principally AAPT, for HY2006-07 was $A10 million compared to $A42 million for HY2005-06. Telecom said the fall "continued to reflect a difficult competitive environment...Competitive conditions impacting on Telecom's Australian operations continue to be highly challenging. Retail prices continue to decline across all products, while wholesale prices have risen following revisions to key supplier arrangements. This has resulted in a substantial decline in margins. These negative trends have been exacerbated by the cessation of substantial corporate and government contracts."

Telecom said that, to respond to these challenges "further significant investment has been made in sales, customer service and IT capabilities in AAPT in order to support improved customer acquisition and retention programmes. This investment continues to have a negative impact on costs and free cash flow in the short-term. This investment continues in 2006-07, and is part of a comprehensive strategic programme designed to fundamentally reposition AAPT services in the mass market."

For 2006-07, Telecom currently expects EBITDA of approximately $A40 million, for its Australian business "subject to certain key assumptions."

Telecom has just announced a $A357 takeover bid for Powertel, which would result in it being merged with AAPT. http://www.itwire.com.au/content/view/9069/127/