Telecom reports $244m nine month loss

Telecom, which has taken a fearful beating on sharemarkets around the world in the last two days, today reported a net loss of $244 million for the nine months to March 31.

The loss was largely due to a $897m write down in the second quarter of its Australian operation AAPT. The Australian unit again damaged Telecom's performance.

In the third quarter, Telecom reported a net profit of $222m, down 19 per cent from the year ago quarter.

Telecom shares were battered down another 6 per cent in New York trading overnight, having plunged 9 per cent in local market trading yesterday.

The selling was prompted by a surprise Government decision to force Telecom to open its phone network to rivals for fast internet services.

The selling has wiped $1.5 billion off its value in two days.

Telecom is also coming under intense political pressure for receiving a leak of the Government document on the decision as well as for destroying its copy of the Cabinet paper.

The company has decided to keep AAPT after considering options on its future including selling the unit.

Chief executive Theresa Gattung said Telecom received a number of proposals but these did not meet the company's requirements from a value or strategic perspective.

She said further consolidation in the industry was both desirable and realistic prospect.

Telecom declared an unchanged, fully imputed quarterly dividend of 9.5c per share, which will be paid on June 9.

Telecom said that excluding the impact of abnormal items, adjusted net earnings for the third quarter fell $23m on adjusted earnings for the year ago quarter.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) for New Zealand operations rose 2.3 per cent to $1.67 billion for the nine months and by 3.1 per cent to $591 million for the March quarter.

However, this was offset by a decline in earnings in the Australian business as a result of adverse changes in the competitive environment and wholesale arrangements in Australia.

The quarterly result was at the lower end of analysts' expectations, which ranged from $220m to $229.

Ms Gattung said she expected ebitda growth in New Zealand for the full year.

Group Quarterly revenue was up 1.8 per cent to $1.45 billion while expenses rose 4.9 per cent to $864m.

Adjusted earnings per share fell to 11.3c from 12.6c.

Ms Gattung said mobile, broadband, IT services and directories were the big drivers of growth.

"The growth in those areas more than offset declines in traditional areas such as calling."

Telecom's mobile business had another solid March quarter with strong connection growth of 70,000 and lower cost of sales compared with the previous period, she said.

"The momentum in connections continues to drive double-digit growth in mobile voice and data revenues."

On the thorny issue of broadband, Ms Gattung said Telecom had attracted 41,000 new customers in the quarter to take its total to 384,000 -- now exceeding dial-up customers.

She said the company was on track to start rolling out its next generation broadband technology later this year.

The company was also poised to deliver faster mobile broadband speeds when it begins upgrading its current mobile network before Christmas 2006.

She said uptake of Telecom's new convergence package of fixed and mobile services had been very encouraging.

Telecom was still investing in Australia, despite the troubles there.

Australian revenue fell 6.8 per cent to A$895m ($1.1b), while edbitda fell 47.7 per cent to A$58m.

Ms Gattung said the March quarter was hit by a significant tightening of wholesale prices and terms with Telstra, continued downward pressure on retail prices and the deferral of major project expenditure by key enterprise customers of Gen-i Australia.

Local service revenue fell 1.8 per cent to $784m, as more customers switched from dial-up to broadband.

National calling revenue fell 5.7 per cent and international calling revenue fell 3.3 per cent.

The company said the decrease in calling revenue was a continuation of both the product substitution and increased competition.

Interconnection revenue, which includes termination of calls on both fixed and mobile networks, increased 4.1 per cent to $126m.

Total mobile revenues increased 9.8 per cent to $573m and revenue per customer fell sharply because of big sales of pre-paid cellphones.

Data revenue increased 6.9 per cent to $327m.

Internet revenue rose 22.2 per cent to $253m reflecting strong growth in broadband customers.

Directories revenue rose $15m to $203m.

Telecom plans to payout 85 per cent of its profit in ordinary dividends. It will pay 9.5cps in each of the first three-quarters and the last quarter dividend will be adjusted to the profit payout ratio.

As previously signalled, Telecom plans to pay further 5cps in special dividends this financial year.

Capital expenditure increased by $22m to $520m for the nine months and Telecom is sticking to its $750m full year estimate.

Telecom's shares closed yesterday at $5.06. They started the week 11.7 per cent higher on $5.73.

- NZPA