Telecom lifts 2nd quarter earnings 15.8pc

10.00 am

Telecom Corp today announced its net profit in the December quarter rose 15.8 per cent to $161 million from $139 million.

The result bettered average expectations of $155 million and helped lift the half-year profit to $312 million from $300 million in the half year to December 2000.

Operating revenue in the quarter rose 4.1 per cent to $1.44 billion while expenses fell 0.8 per cent to $875 million.

Expenses for the half year were up 4.9 per cent and revenue up 6.4 per cent.

Earnings before interest, tax, depreciation and amortisation (ebitda) rose 12.8 per cent to $564 million in the quarter while operating earnings were up 13.6 per cent to $360 million.

Ebitda for the half year grew 9 per cent to $1.101 billion with the company's four businesses all posting increases.

The quarterly interest bill rose to $109 million from $93 million and the tax bill rose to $91 million from $84 million.

A fully imputed, unchanged dividend of 5 cents per share was declared for the quarter and will be paid on March 22.

Chairman Roderick Deane said the company was performing well given slowing rates of growth in telecommunications markets on both sides of the Tasman.

He congratulated his management for lowering costs, especially in the wireless business.

Earnings per share decreased by 1.8 per cent for the half year to 16.8 cents while they increased by 10.1 per cent for the December quarter to 8.7 cents.

Dr Deane singled out operations in the data and internet divisions as star performers and these are seen as the platforms of future growth. Revenue in the once stellar cellular division was static.

Chief executive Theresa Gattung said the performance of its Australian unit AAPT had improved with the major focus on operating margins within AAPT and Cellular One and on growing the internet and data services of Connect.

"Overall, Telecom remains on track with its focus on delivering solid bottom-line performance," she said.

Telecom's traditional business, New Zealand Wireline, had half-year ebitda of $795 million, up 5.2 per cent on the corresponding half year. Operating expenses fell 5.3 per cent, helped by a 7.3 per cent cut in staff, while revenues grew 0.4 per cent, reflecting slowing growth in calling market revenues.

The average price per call minute continued to fall -- down 4.6 per cent from the December 2000 quarter. Data revenue grew 11 per cent.

The wireless (mobile) business reported ebitda of $134 million, up 10.7 per cent. New Zealand revenue was stable while cost of sales fell 9.2 per cent for a 19 per cent increase in gross margin. Average revenue per customer rose in the quarter.

Telecom's international division, including AAPT and TCNZA in Australia, reported ebitda of $119 million, up 14.4 per cent.

Revenue growth slowed in Australia as did expenses growth while data revenues grew strongly.

Ebitda for internet and directory services grew 23.2 per cent to $69 million with revenue from Telecom's internet service, Xtra, up 36.1 per cent. Average hours per active customer rose 32.9 per cent. In Australia, Connect's revenues grew 11.9 per cent.

Telecom said its balance sheet strengthened through constraint on capital expenditure, retaining earnings and refinancing long-term debt.

Capital spending is forecast to drop again -- from $1.1 billion in 2001 to $900 million in the June 2002 year.

Telecom does not expect any dividend from its half owned cable company Southern Cross and it said the extent and timing of any future dividends was uncertain.

- NZPA