Telecom quiet on how govt broadband will affect profits

Telecom chief executive Paul Reynolds. File photo / Paul Estcourt

The country's second biggest listed company has reported a slide in first half-profit in line with analyst expectations, but its chief won't be drawn on how the Government's Ultra Fast Broadband (UFB) initiative could shape future balance sheets.

Telecom reported an adjusted net profit of $158 million in the six months to December 31, which was down 35 per cent from $243 million a year earlier - a result which in part was blamed on a $53 million increase in tax and regulatory changes.

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Adjusted earnings before interest, tax, depreciation and amortisation fell 0.5 per cent to $868 million, in line with analysts' predictions.

Adjusted operating net revenue shrank 3.3 per cent to $2.58 billion, with only interconnection fees and IT services lifting sales.

The phone company cut its forecast capital expenditure to a range of between $950 million and $1 billion from $1 billion to $1.1 billion previously, but said it had not taken into account any impact from UFB in any of its forecasting, which was likely to "reshape the industry".

Telecom said last month its goal of structurally separating its business by the end of June would not be achieved as it was unable to sign a contract for the Government's ultra-fast broadband (UFB) project at the end of last year.

Company chief executive Paul Reynolds described the separation of Telecom into two companies as a "significant and complex piece of work".

Chief financial officer Nick Olsen said he could not offer a specific timetable because "that's the reality of being in an uncertain process".

However the company has previously said the process could take more than six months.

Reynolds said a strong focus on "operational excellence and cost control" had helped offset ongoing regulatory impacts and a higher tax bill.

"We remain on track to deliver our full year earnings guidance and indeed we have improved the group capex outlook; we now expect full year capex to be within the $950m-$1b range for the financial year," he said.

Reynolds said the company's XT mobile network continued to grow strongly with more than 1 million customers, representing 45 per cent of its total mobile base and 71 per cent of mobile revenue.

Telecom's average revenue per user was up, driven partly by the smartphone market with penetration now at 16 per cent.

This was still well behind Australia on about 50 per cent and half the penetration of some markets in Europe, Telecom said.

Reynolds said the increase in the number of people using smartphones and data had been offset by a decline in prices in the telco market.