KEY POINTS:
Telecom is announcing its second-quarter earnings on Friday, the first quarterly earnings announcement since chief executive officer Paul Reynolds took the helm in October.
Market analysts will be watching to see whether trends from the telco's first quarter, which was characterised by growing regulatory and competitive challenges, have
continued to affect earnings.
Telecom stocks attracted unwanted attention last Thursday, after they slipped below $4 for the second time in a month.
Shares in the telco giant rested at $3.99 January 22 and 23, during the global stock slump. But by Friday the stock had rallied to close at $4.07.
Last week's dip has been blamed on uncertainty about whether Telecom's Government-enforced separation plan would be accepted by Communications Minister David Cunliffe.
Telecom is putting the finishing touches on plans to split into three business divisions - wholesale, retail and network.
The split, which is due to take place on March 31, is aimed at improving competition in the broadband market by letting Telecom's rivals buy wholesale broadband on the same terms as Telecom's retail division.
Last week, Cunliffe said he was still considering submissions on the Telecom's latest separation plan, and suggested an outright rejection was a possibility.
Submitters - the Telecommunications Users Association and internetNZ - have said that performance incentives for senior Telecom staff included in the separation plan will encourage staff to keep favouring Telecom over its rivals, reducing rival telcos' chances of achieving a level playing field.
Goldman Sachs JBWere telco analyst Tristan Joll said looking ahead to Telecom's second quarter results was just a matter of "waiting and seeing."
"At the first quarter, they identified what the market considered to be fairly identifiable and rational trends, and the result on Friday will just be looking to see if they've continued."
Joll said there had been a lot of "regulatory overhang" on Telecom stock in the past year, but from an investment point of view it was starting to feel as though there was greater regulatory certainty.
Greater certainty would allow Telecom to get on with imple- menting some of the Government's requirements, and get on with the job of being a telecommunications provider.
As for the suggestion the Government could reject the separation plan, Joll didn't read a lot into the Communication Minister's comments, other than to say he's acknowledging that there is a process going on".
Joll said if the Government required more work to be done on the separation plan, the Government and Telecom had been working together for the past six to 12 months and expected this co-operation to continue.
He said he was a maintaining a hold recommendation for Telecom shares, predicting the stocks to perform in line with the NZX50 for 12 months.
In August, Telecom said its 2007/08 profit would be between $680 million and $720m, compared with $855m in 2006/07.
Telecom returned $1.1 billion to shareholders in early October, but analysts noted that having the funds on the balance sheet during the first quarter had lowered interest costs.