Telecom halts earnings decline, says Reynolds

Telecom Paul Reynolds. Photo / Dean Purcell

Telecom boss Paul Reynolds says the company has halted significant earnings declines, pointing to a fall of 0.2 per cent in the company's full year adjusted earnings before interest, tax, depreciation and amortisation (ebitda).

Telecom today reported a 4.5 per cent fall in its bottom line full year net profit to $380 million, with revenue down 6.5 per cent to $5.27 billion.

Adjusted ebitda for the year to June was $1.76b, and for the fourth quarter rose 5.4 per cent to $428m.

"Telecom has halted the significant earnings decline of the previous two years and achieved notable improvements in the trajectory of each of its businesses," chief executive said Reynolds.

The fall in revenue mainly reflected continued competitive and price pressure in the legacy fixed line businesses, Telecom said.

"Chorus, Gen-i and AAPT have each delivered ebitda growth for the year, and the turnaround in the Retail business is on track for FY11," Reynolds said today.

A unchanged fourth quarter dividend of 6c per share is to be paid.

For the three months to June net earnings fell to $42m from $78m a year earlier, with adjusted net earnings down 40 per cent from $70m to $42m.

Telecom was plagued by outages to its XT network at times during the year.

The company noted that mobile revenue in its Retail division fell 3.4 per cent in the fourth quarter to $142m, while for the year it was up 0.7 per cent to $594m.

The mobile revenue decline in the three months to June was partly due to high revenues a year earlier following the launch of the XT network, and also to the effect of reparation credits and loyalty discounts given to customers affected by partial XT outages, the company said.

Traditional mobile voice and text revenue also declined, mostly offset by gains in growth products such as mobile broadband and roaming revenues with consumer segments. Retail mobile broadband revenue rose 98 per cent in the fourth quarter from a year earlier and voice roaming gained 37 per cent.

At Gen-i, which provides services to business customers, mobile revenue rose 11.6 per cent to $48m in the fourth quarter and was up 5.5 per cent to $192m for the full year.

Telecom said the XT mobile network continued to grow strongly during the fourth quarter, with 712,000 customer connections at June 30, up 20 per cent on the previous quarter.

Fixed broadband market growth was stable around 10 per cent in the latest quarter, with Telecom Retail's market share steady at 56 per cent.

For the 2010 financial year, revenues were down across most revenue lines, most notably in calling revenue, while the International carrier services business was affected by falling market prices and the impact of the strong NZ dollar on US dollar-denominated revenue.

Small rises were recorded in mobile and interconnection revenue. Falls in revenue were more than offset by a cut in operating expenses, which fell 11.4 per cent to $3.51b for the full year, Telecom said.

The company is expecting adjusted ebitda of $1.72b to $1.78b for the year to June 2011, with adjusted net earnings after tax between $300m and $340m, but the outlook is subject to material change.

- NZPA