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Friday, 20 August 2010 10:34

Telecom NZ reports revenue, EBITDA and profit reductions


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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Telecom said: "Mobile revenue (including Retail and Gen-i) grew in FY10 by 1.8 percent or $NZ14 million when compared to FY09, although the combined mobile revenues for Retail and Gen-i were flat at $NZ190 million in Q4 FY10 when compared to Q4 FY09.

"Mobile revenue growth in FY10 was impacted by the adverse effects from the partial XT outages, which included reparations and loyalty credits reducing revenue by $NZ16 million during the year, lower customer take-up as customer confidence in the XT offerings was restored and marketing campaigns resumed at the end of FY10. These effects were inflated in Q4 FY10 due to the high level of revenue earned in the prior comparative period when the XT network was launched."

Reynolds said the company's priorities for the current financial year would be to focus on growth in mobile, cloud services, trans Tasman services and Australia and to grow the company's share of ICT spend in high value clients. (IT solutions revenue declined by $NZ8 million to $NZ479 million in FY10 "principally due to an overall decline in procurement revenue in New Zealand as a result of economic uncertainty and delayed customer spend," the company said.)

For AAPT, which reported EBITDA growth of 16 percent to $A108m over the year, Reynolds said the focus would be on business sales, on completing the sale of the consumer business to iiNet and on data services and a new SIP voice product for businesses. In Q4 the company introduced a new self service portal to its wholesale customers.


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