Telecom posts first-ever year loss

11.00am

New Zealand's largest listed company, Telecom Corp, today reported its first-ever annual net loss of $188 million, after making an $850 million writedown on its Australian unit AAPT.

Excluding unusual items like the AAPT writedown, the company bettered private sector forecasts with a pre-abnormal net profit of $670 million, up 9.1 per cent on last year's $614 million figure.

The writedown was widely flagged by the market, as Telecom battles to make inroads in the competitive Australian market, and comes at the bottom end of expectations ranging between $900 million and $1 billion.

Telecom originally paid $2.2 billion for the investment.

Chairman Roderick Deane today defended the writedown.

"This is a responsible and prudent book value adjustment," Dr Deane said.

"Many telcos have had to adjust values in the last couple of years. This is a moderate step compared to most."

He stressed that cash flow was strong and that the writedown would not have a material impact of Telecom's financial position or its ability to access debt markets.

The telco also wrote off a residual $8 million after tax charge from the canning of Telecom's CDMA rollout across the Tasman.

Telecom's full year income this year compared to a result last year which included a $245 million dividend from its share in the Southern Cross cable.

Earnings before interest, tax, depreciation and amortisation (ebitda) and the cable dividend were $2.265 billion, up 9.4 per cent on the previous year. Excluding abnormals, the company earned $1.4 billion from its operations, compared with $1.593 billion for 2001.

Net cashflows from operating activities were $1.351 billion, compared with $1.758 billion last year.

Overall operating revenues grew by 2.5 per cent while operating expenses were reduced by 1.8 per cent. Analysts were expecting improvements in revenues due to cost-cutting.

The company will pay a fully imputed fourth quarter dividend of five cents per share in September, bringing total dividends for the year to 20 cents per share, the same as last year.

Earning from Telecom's New Zealand operations were $1.54 billion while the Australian operations earned $44 million, and corporate and other services recorded a loss of $143 million, bringing the total group to $1.45 billion.

Mobile operations earned $133 million, Telecom's wireline -- its fixed line service to residential and business customers -- earned $1.2 billion, its internet and directory services made $110 million and its international services made $99 million, bringing total earnings before interest, taxation, depreciation and amortisation (ebitda) to $1.5 billion.

In Australia Telecom's consumer business earned $61 million but its IT business and internet services lost $17 million, giving an ebitda total of $44 million.

Fourth quarter results showed Telecom made a net loss of $688 million for the three months to June 30, compared with a loss of $38 million last year, but that result was impacted by the AAPT writedown.

- NZPA