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Telecom chief executive Paul Reynolds says the company's earnings will likely be lower over the next two years, but that will be followed by a return to growth as pressures ease.
In a statement coinciding with Telecom's annual management briefing day in Sydney, Dr Reynolds said the company was investing for long term health and to drive bottom line growth.
It was forecasting a 4-6 per cent decline in earnings before interest, tax, depreciation and amortisation (ebitda) in the financial year to June 2009, and 0-2 per cent for the financial year to June 2010.
These falls were due to costs associated with splitting the company into separate operating units.
That would be followed by growth of 4-6 per cent a year in the financial years from the June 2011 to June 2013.
The company maintained its forecast for net profit for the year to the end of June 2008 at $700 million to $730 million.
Full year ebitda from New Zealand operations was expected to decline 7-8 per cent, while ebitda from Australian operations was estimated to be A$70m ($82.4m) to A$80m. Group ebitda guidance was about $1.88 billion to $1.9 billion.
Capital expenditure was forecast to be about $975m.
For the year to June 2009 capital expenditure of $1 billion to $1.1 billion was forecast.
Dr Reynolds said a new management team was being built, including the announcement last week of Russ Houlden as the company's new chief financial officer.
The new team would underpin Telecom's drive to build a customer-focused culture, he said.
Telecom was also building an all-internet protocol (IP) platform for efficiency and innovation as it moved to a lower cost operating model that would help it compete successfully.
"I understand the rough ride our shareholders have experienced, particularly over the past two years. The declining share price reflects the uncertainty that has existed," Dr Reynolds said.
"Telcos around the world are grappling with similar challenges given the pace of regulatory, competitive and technological change. "Many things within our business are in good shape while others, to be frank, need fixing."
Last week Communications and Technology Minister David Cunliffe announced he was approving a plan that broke Telecom up into three separate divisions - one for network access, called Chorus, and the others for wholesale and retail operations.
Telecom shares were unchanged at $3.80 in late morning trade today, with the high for the year having been $4.98 last April.
- NZPA
