Telecom lifts net profit for nine months

Theresa Gattung

Telecom Corp today said today it had lifted its profit for the nine months to March 31 to $650 million.

The company will pay a 9.5cps fully imputed dividend on June 10.

The company earned a net profit of $259m in the third quarter, up 11.6 per cent on a year ago. Revenues for the quarter were up 3.4 per cent to $1.41 billion.

The were net abnormals of $22m for the third quarter, leaving adjusted net earnings at $231m, up 5 per cent.

Telecom said it was comfortable with expectations of a full year net profit before abnormals in a range of $795m to $837m. It said it was comfortable with expectations of $811-$880m for the 2005/06 years.

Revenue for the nine months rose 4.5 per cent to $4.19 billion. Adjusted ebitda (earnings before interest, tax, depreciation and amortisation) was up 1.7 per cent to $1.71 billion and earnings per share rose to 33.4c from 31.1c.

The third quarter abnormals included an $8m gain on the sale of Telecom's minority stake in United States satellite operator Intelsat, a one-off charge of $31m ($21m net of tax) to reflect intercarrier provisions at AAPT and $41m of booked income ($37m net of tax) in relation to cable company Southern Cross.

Adjusted net earnings for the nine months were $607m, up 9 per cent.

Chief executive Theresa Gattung said the result reflected good progress in key focus areas, with mobile, broadband and ICT all performing strongly over the nine-month period.

The result was driven by strong revenue growth, lower net interest expense due to reduced debt levels and lower depreciation. Traditional calling revenue continued to decline.

Operating expenses rose 9.3 per cent to $2.48 billion in the nine months.

After a slow start to the quarter in broadband, a record 19,618 connections were made in March and Ms Gattung said the company was on track to reach its target of 250,000 residential customers by the end of December 2005.

In mobile, she said the company was gaining momentum with its T3G service while uptake of its new Push2Talk was ahead of expectations.

She said Telecom's Australian business, AAPT, remained stable, with continuing progress in the consumer business.

AAPT revenue fell 1.9 per cent to A$962 million ($1.0 billion) million on unchanged ebitda of A$109 million.

Operating revenue in New Zealand rose 8.9 per cent to $3.21 billion with increases for cellular, data, internet and solutions, and interconnection partly offset by declines in calling and local service revenues.

"The trend underlined the transition from traditional voice services to broadband, mobile, IT and data," Ms Gattung said.

Total calling revenue fell 9.1 per cent to $677m, with national calling down 6.2 per cent and international calling down 15.5 per cent. This was partly offset by a reduction in the cost of sales.

Interconnection revenue from other telcos rose 14.2 per cent to $121m primarily due to interconnection revenues from text messaging growth.

Total cellular and other mobile revenues increased 15.2 per cent to $524m with data revenue up 114 per cent to $77m. Total mobile connections were up 14 per cent at 1,527,000 with March quarter connections up 14.2 per cent.

Total data revenue was up 13 per cent at $427m with Solutions revenue up $184m, boosted by the acquisition of Gen-i and Computerland during the period.

Directories revenue grew by 3.3 per cent to $188m.

During the quarter, Southern Cross Cable Network made new sales of approximately US$176m ($243m) and collection of receipts from these over the next three years should lead to repayment of the outstanding bank debt.

Group capital expenditure increased by $97m to $498m for the nine months with 700m forecast for the full year.

Telecom shares closed at $6.01 yesterday, having traded between $5.41 and $6.61 over the last year.

- NZPA