Telecom's earnings forecast has been lowered 20 per cent by Credit Suisse First Boston, which cites increased competition and declining sales for the country's biggest phone company.
The investment bank and brokerage says in a report that it has "significantly" lowered its forecast of Telecom's net profit in the current year
ending June 30 to $603 million from $752 million.
The company earned a net $771 million in fiscal 2000.
Earnings before interest and tax from New Zealand operations are likely to decline for the first time since Telecom listed in 1991, says the report.
"Earnings are being squeezed by additional costs from new business areas, pressure on traditional revenue streams, and slower growth in cellular and internet operations."
Most of the earnings downgrade reflects slow revenue growth, the report says.
Full-year revenue growth is likely to be 3 per cent, down from 4.9 per cent in the previous year.
Costs are expected to rise 12 per cent or more, due to higher costs of sales and the expense of setting up new businesses.
The additional cost of Telecom's buying the remaining 20 per cent of AAPT, Australia's No 4 phone company, will dilute profit $35 million in the current year, the report says.
Credit Suisse First Boston, according to newspaper reports, is advising Telecom as it investigates buying the cellphone assets of Cable & Wireless Optus, Australia's No 2 telephone company.
Telecom shares were up 12c at the close of trading yesterday, to 598c.
