KEY POINTS:
Shares in Telecom Corp were sold 4 cents to $3.81 after the company reported its March quarter net profit fell to $140 million from $239m a year ago.
Excluding the contribution of the Yellow Pages Group, which was sold last year, the year ago net profit was $195m.
Chief executive Paul Reynolds said Telecom's operations in New Zealand for the quarter were slightly better than anticipated.
"The past quarter has brought encouraging signs of progress and improvement, particularly in the ICT and broadband areas, against the backdrop of the strategy we outlined three weeks ago."
For the nine months to March 31 net profit fell to $535 million from $693m a year earlier.
Telecom said its dividend for the quarter would be steady on 7 cents. It said it would pay out 75 per cent of net profit for the year and the final dividend would adjusted accordingly.
Telecom is in the midst of a government-imposed reorganisation that has forced the company to split into three and open its network to competitors.
Dr Reynolds, who took over as ceo in September as part of the company shake-up, said the company's strategy was focused on mobile, ICT and broadband.
Growth was now well under way, he said.
Capital spending in the nine months had risen 13 per cent on the year ago period to $632m and the company plans to spend nearly $1 billion in 2008/9.
Dr Reynolds said the company was rolling out of a world class broadband network and a new mobile network that would "transform customer experience".
The fall in earnings had been driven by an anticipated reduction in traditional services revenue, as competition bit.
This was good news for New Zealand consumers, he said.
Group operating revenue in the nine months rose to $4.21 billion from $4.15 billion while expenses rose 4.5 per cent to $2.8 billion.
Earnings before interest, tax, depreciation and amortisation (ebitda) were flat at $1.4 billion while earnings per share fell to 28 cents from 34 cents.
Dr Reynolds said New Zealand broadband sales had rebounded strongly from the previous quarter with both strong revenue and connection growth.
Broadband and internet revenue in the quarter increased by 22.3 per cent compared with the same quarter last year.
High speed broadband connections increased by 40,000, with Telecom Retail, one of the three units the company has been split into, securing 48 per cent.
Dr Reynolds said IT services had an outstanding quarter, with revenue jumping 22.9 per cent on the back of a number of major customer wins over the past couple of years.
There was an improvement in ebitda in Telecom's Australian operations as the benefits of the AAPT merger with Powertel paid dividends, but the troubled unit still made a bottom line loss of A$34m ($41m).
Telecom promised improved mobile handsets after signing a deal last week with Brightstar, one of the world's largest mobile distribution companies.
During the quarter, Telecom booked an $11m dividend from its half owned cable company Southern Cross. A further dividend is anticipated in the fourth quarter.
Operating revenue in New Zealand fell 2.2 per cent to $3.14 billion in the nine months. Declines in traditional areas of revenue such as calling, dial-up and local services were partially offset by increases in revenue for data, broadband and internet, and IT.
Residential access lines fell to 1,398,000 from 1,405,000 and calling revenue fell 10 per cent to $664m.
Interconnection revenue fell 9 per cent to $103m.
Total mobile revenues fell 3 per cent to $596m while data revenue grew by 0.9 per cent to $320m and broadband revenue rose 14.2 per cent to $225m.
Telecom Wholesale reported local service revenue rose 53 per cent to $87m. It said national calling revenue was $14m and broadband internet rose 42 per cent to $47m.
Total IT revenue rose 14 per cent to $300m.
In Australia, operating revenue rose 10 per cent to A$938m while ebitda jumped 133 per cent to A$56m.
Telecom shares have fallen 12 per cent this year against a 10 per cent fall in the NZSX-50 index.
- NZPA