Telecom NZ wipes $A836m of value of AAPT

Stuart Corner
Friday, 03 February 2006 09:14

IT Industry - Strategy

Telecom New Zealand has reported a net loss of $NZ466 million after tax for the half year to December 31, 2005, after a $NZ897 million ($A836m) write-down of the carrying value of the company's Australian operations.

This is somewhat higher than the figure of $A700m-$A800m given when the company flagged the write-down last month. The company said the reduction in the carrying value, from $A1.464 billion to $A628 million was based on "revised future cash flow forecasts" and remained "sensitive to key assumptions around industry growth rates, gross margins, capital expenditure, and the timeframe for realising benefits from the investments being made in the major change programmes."

CEO, Theresa Gattung said that, despite the massive write-down "we remain positive about the investments we have made in a number of major change initiatives at AAPT (as outlined at May 2005) and expect to see these materially impact performance in the next financial year and beyond.''

Telecom divides its Australian operations into consumer and business. Consumer comprises AAPT's residential and small business fixed line, mobile and Internet operations. Total revenue for this unit was $A281 million, a decrease of 9.1 percent. Operating expenses declined 10.8 percent to $A215 million. Its contribution the overall result (revenue less directly attributable costs) was $A66 million, a decrease of 2.9 percent.

While the fixed line customer base of 445,000 decreased 3.3 percent compared with the prior year (as at 31 December 2005), dial-up connections increased 48.5 percent to 98,000. Broadband numbers of 63,000 increased 425 percent and have been growing at approximately 8,000 new customers a month in the first half of 2006.

Revenue in mobile declined due to the move away from selling mobile as a stand-alone service, and price declines driven by capped offers. A decline in the stand alone mobile base of 27,000 customers was offset by growth in the bundled base of 27,000 customers.

Australian business comprises AAPT's operations in the business, corporate, government and wholesale markets, and Gen-i Australia. Total revenue was $A318 million, a decrease of 8.1 percent. Operating expenses reduced 2.5 percent to $A232 million. The unit's contribution (revenue less directly attributable costs) was $A86 million, a decrease of 20 percent.

Business customers have grown to 10,885, an increase of 30.2 percent on the prior year, primarily in the mass area as a result of targeted investment. Bundled customers have increased to 36 percent, an increase of 50 per cent on the prior year.