KEY POINTS:
Telecom reaffirmed its earnings guidance of a 5 per cent to 8 per cent drop in full year profit today.
Net profit for the June 2008 year would be $680 million to $720 million, chairman Wayne Boyd told shareholders at the annual meeting in Dunedin.
"This is largely
a reflection of our response to increased competition and the costs of implementing operational separation," he said in speech notes.
The Government last month confirmed it would order Telecom to split into wholesale, retail and network operating divisions in a bid to increase competition, with the split to take effect by March 31.
Mr Boyd said capital spending would increase by as much as 15.5 per cent to $950-975m, mostly due to the costs of building a new mobile network.
The annual meeting also marked the start of Paul Reynolds' tenure as chief executive. The former BT Group executive told the meeting he had learnt a lot about grappling with complex regulations from his time at BT.
Mr Reynolds, who started on Monday, however had little to say about his strategy at Telecom other than it would try to get things right first time.
The company in August made a public apology and agreed to pay a $7m compensation package after a botched transfer of its Xtra email service to a Yahoo platform that resulted in many of its half million customers losing service for days.
Mr Boyd said the arrival of Mr Reynolds was a watershed for the company.
He was confident the company was on a path that would deliver for shareholders and customers.
"We are in a new era and this is symbolised by the new regulatory landscape and the arrival of Paul as chief executive."
The company separated its retail and wholesale divisions a year ago, with its retail division receiving the same service as outside customers.
Five of the biggest operational and technology projects the industry had seen in this country -- involving local loop unbundling, building new networks and operational separation -- were well under way.
Mr Boyd said Telecom was confident it could agree a workable separation model with the Government by the end of this year.
Implementation costs for separation were forecast at $200m over four years with capital expenditure and operating costs of $40m.
Prices for competitors to use Telecom's network would be set before Christmas.
He said there would potentially be different prices for urban and rural customers "which will shape the way our competitors may choose to compete in those areas".
Telecom shares were down 3 cents to $4.55 in a weak market today.
- NZPA
