Telecom NZ reports revenue, EBITDA and profit reductions

Stuart Corner
Friday, 20 August 2010 10:34

IT Industry - Listed Tech

Like Telstra last week, Telecom New Zealand has reported declines in revenue, EBITDA and profit for FY10 but by reducing operating expenses has managed to significantly improve free cash flow.

Like Telstra, it highlighted the free cashflow boost, up 27.6 percent to $NZ581m, as the top 'key message' in its results.

Operating revenue was down 6.3 percent to $NZ5.271b, EBITDA down 0.2 percent to $NZ1.764b and net earnings after tax down 20.9 percent to $NZ382m. The company said results were in line with guidance.

CEO Paul Reynolds said: "Telecom has halted the significant earnings decline of the previous two years and achieved notable improvements in the trajectory of each of its businesses. In a year of further recessionary and regulatory impacts, it is especially pleasing to have delivered strong growth in free cash flow of $NZ126m, or 28 percent, the first such growth since the regulatory shock of 2006. Our transformation and turnaround programme is on track.

"Our focus on managing costs has delivered $249m of cost removed from the business during the year, with labour costs down around 3 percent in the fourth quarter. Capital expenditure was reduced by $130m compared to the previous year."

Like Telstra, Telecom NZ has been hit by the decline in PSTN revenues. It reported that: "The full year local service revenue decline of 6.6 percent in FY10 remains just up on the FY09 revenue decline of 6.2 percent in an increasingly competitive market. The number of retail access lines as at 30 June 2010 was 6.8 percent lower than at 30 June 2009, an improvement on the 7.9 percent decline during FY09.

"While access and calling bundles have eased national calling revenue declines, this has been mostly offset by other calling revenue declines, as a result of continued reductions in mobile termination rates and substitution of international calling."

Closure of the company's CDMA network during the year, and the problems with its new XT network saw mobile subscriber numbers decline during the year to 2.171 million at 30 June 2010, from 2.186 million at 30 June 2009.n

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