KEY POINTS:
Vector says its bid to get in on the Government's $1.5 billion broadband scheme has been well received by ministers.
The company yesterday reported a 17 per cent increase in operating net profit to $90.8 million for the six months to December 31 and says it is on
track to beat analysts' forecasts of $155 million for the full year.
Earnings before interest, tax, depreciation and amortisation increased from $281.5 million to $313.2 million and revenue from continuing operations was down from $611.2 million to $609.5 million.
Vector is New Zealand's largest lines and infrastructure network company and is vying with Telecom and other broadband operators for a chunk of the super-fast fibre optic internet system direct to homes.
Chief executive Simon Mackenzie said his company would be prepared to spend "hundreds of millions of dollars" on expanding its existing network to meet the Government's requirements.
An announcement from Communications and Information Technology Minister Steven Joyce on the next step of the broadband plan is expected by the end of the month.
Mackenzie said his company had advantages over its rivals for a network that could be built around Auckland in about four years, followed by Wellington and other cities in conjunction with other lines companies.
"We don't suffer from any legacy assets, we're not vertically integrated, we would be just a pure network operator on an open access basis."
In Auckland, Vector has 500km of fibre optic network already laid in the CBD and other business districts and is expanding that network by an extra 300km as part of an agreement with Vodafone.
Mackenzie said parts of the network could be slung around overhead wires to save costs which, in the case of power lines, treble when laid underground.
"Clearly there would be some consenting issues but fundamentally the assets that we have that we can leverage are both underground and overground," he said.
"The nature of our proposal means it would have a minimal impact on the Government's balance sheet and given the current fiscal conditions [we] believe that would be attractive to them." Forsyth Barr analyst Andrew Harvey-Green said Vector had plenty of advantages providing the fibre optic infrastructure but the main question was over the system of payment from telcos to use it.
The half-year results show new electricity connections fell by 21 per cent and new gas connections fell 18 per cent from the year before.
Overall, electricity consumption on the Auckland network fell 1 per cent in the six months, with residential down 0.23 per cent, large commercial and industrial fell 2.35 per cent and small industrial users went up 0.35 per cent.
Growth has recently been around 2.5 per cent a year.
Last July's sale of Vector's Wellington electricity network to Hong Kong's Cheung Kong Infrastructure for $785 million resulted in a sale gain of $202.9 million.
The company had resisted calls for the payment of a special dividend, instead repaying $560 million in debt, with a further $200 million repayment of fixed interest rate bonds scheduled for early next month.
Its debt had fallen $485 million to $2.5 billion, resulting in an improved debt-equity ratio of 55.8 per cent.
Mackenzie said the early winter surge in thermal generation and winter demand would help boost gas and electricity transmission revenue in this half year.
Vector had trimmed costs by $10 million and would cut by another $10 million in the second half of the year. Last calendar year the company made more than 100 staff redundant, the board passed up a recommended fee rise and Mackenzie says senior executives had no salary rise expectations.
The company is urging the Commerce Commission to delay its five-year price path reset due for later this year until after a review of methodologies for four key inputs, due to be finished in 2010.
Vector shares closed steady at $2.26 yesterday.
