Telecom NZ reports declines in revenue, EBITDA and profit

Stuart Corner
Saturday, 22 August 2009 12:51

IT Industry - Strategy

Telecom New Zealand has reported declines in revenue, EBITDA and net profit after tax for the year to 30 June 2009, saying the results "cap off a year of progress"

"Adjusted" revenue was down two percent to $NZ5.587m, adjusted EBITDA down 6.5 percent to $NZ1.768m and adjusted NPAT down 32 percent to $NZ483m. Decline in revenues was largely the result of declines in retail revenues and revenues from Australian subsidiary AAPT, offset by growth in wholesale and international.

The company said the adjusted information was "consistent with the way that financial performance is measured by management and is provided to assist in a meaningful analysis of the trading results of Telecom." Statutory reported results were rather worse. EBITDA was down 11.2 percent and NPAT down 43.9 percent. The biggest adjustment was a $NZ68m impairment resulting from a decision, in the first half, to write down the carrying value of goodwill in AAPT subsidiary Powertel In the first half of FY09 Telecom NZ took a $NZ68m hit by writing down the goodwill relating to Powertel, acquired by AAPT in May 2007 for $NZ347m. Telecom NtZ said that its carrying value was "no longer supported by forecast earnings."

Summing up the results, CEO Paul Reynolds, said: "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.

"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."

The company blamed its declining fortunes largely on the global economic downturn saying: "As a result of the economic downturn in both New Zealand and Australia, Telecom has seen a reduction in customer spending during FY09, most notably in calling, broadband, mobile and revenue from the provision of connectivity in new subdivisions. These factors are estimated to have reduced Telecom's EBITDA by around $NZ40 million in FY09 compared with FY08."

(However in this same economic climate Telstra was able to lift revenues 2.7 percent, EBITDA 5.1 percent and NPAT by 10.3 percent).

Compared to FY08, Telecom NZ's retail revenue declined 6.1 percent and AAPT revenue 6.4 percent while wholesale & international revenue grew 10.5 percent. However of the $NZ117m increase in wholesale and international revenue around half came from a 22.4 percent increase in calling revenues "primarily as a result of the favourable impact of a weakening NZD on USD denominated international voice traffic."

In retail,  increase in broadband and Internet revenue was offset by declines in most other revenue lines. Mobile revenues declined by $NZ41 million in FY09 largely because of lower voice and data pricing and the reduction of Australian roaming revenues following the closure by Telstra of its CDMA network in Q4 FY08. Mobile data revenues decreased due to the impact of increased monthly text caps on certain prepaid plans which increased text volume without a corresponding increase in revenue, offset partially by continued growth in mobile broadband. Other mobile revenues reduced as customers delayed device upgrade, launched on 29 May 2009.

In Q4 mobile subscriber numbers fell by 26,000 "due to subdued activity prior to the launch of XT." Reynolds said: "The launch of the XT mobile network was a remarkable achievement and surpassed our expectations. 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 percent increase in voice traffic, and a 300 percent increase in data download traffic compared to our CDMA network."