Telecom NZ halves value of Australian business

Stuart Corner
Monday, 23 January 2006 07:16

IT Industry - Strategy

Telecom New Zealand has halved the carrying value of its Australian operations, following a review of their recent performance and a reassessment of the prospects for the Australian communications industry.

It said the review had identified a number of significant challenges to the short and long term earnings outlook for its Australian operations, in particular: a significant tightening of wholesale prices and terms with Telstra; continued downward pressure on retail prices; the deferral of major project expenditure by key enterprise customers of gen-i Australia.

An exact value will be given when the company announces its half year results on 2 February, but TNZ said it would be in the range $A600-$A700 million, compared to around $A1.4 billion at present.

Despite the move the company says it "remains positive about the investments being made in major change initiatives in its Australian business," and it "still expects realisation of material benefits from these programmes in future periods."

It says that the strategic review of options for the Australian business, announced on December 15, 2005, is on track and scheduled to start in late January/early February as previously indicated. It has played down reports saying that it had withdrawn plans to seek a buyer for AAPT.