KEY POINTS:
Telecom has reported a 59 per cent fall in its first half net profit to $162 million, while chief executive Paul Reynolds said good progress had been made in a slowing economy.
The company reported today adjusted earnings before interest, taxation depreciation and amortisation (ebitda) of $884 million
for the six months to the end of December.
That was within guidance and a 5.5 per cent decline on the equivalent half in the prior year, Telecom said.
When the one-off impact of $101m of impairment charges was included, the ebitda of $783m was a decline of 16 per cent on the first half of the prior year.
The $101m of impairment charges included the previously announced impairment of $33m of GSM mobile equipment, relating to the decision to upgrade to its newW850 mobile technology, and a $68m write-off of goodwill relating to its Australian PowerTel investment, as its carrying value was no longer supported by forecast earnings.
Reynolds and senior Telecom executives were upbeat at a media and analysts presentation held this morning.
The impact of the current economic downturn on the company was "modest", said Reynolds. It had taken about $10 million from earnings during the second quarter of the financial year and should end up around $20 million for the year to date.
There was some evidence of a market slow down in broadband, the number of call minutes and mobile business.
The company is stressing its focus on cost cutting, including shutting down its Ferrit online shopping site, which will save it $1 million a month. The pay freeze for senior executives and sending 250 jobs offshore to the Philippines will also save Telecom money.
One of the big developments this year for Telecom is the roll out in June rollout of its new WCDMA mobile network, which it says will be New Zealand's fastest and highest coverage 3G system. It is hoping this will push its share of the mobile market from around 41 per cent now to 50 per cent.
Reynolds said earnings across the business were expected to fall somewhere in the range of 5 per cent to 8 per cent this year. Earnings from its AAPT Australian investment were going to fall by more than expected, - now in the $A60m -$A80m range rather than the earlier $A10m.
Adjusted group net earnings after tax are expected to be unchanged, falling between $460m to $500 million.
He said the company's new management team had delivered strong operating metrics in the focus areas of broadband, mobile and ICT.
Revenue - which increased 0.4 per cent to $2.84 billion in the half - had been held constant, the business was managing operational expenses responsibly, and major capital investments were on schedule, he said.
"The impact on Telecom of the economic slowdown does not appear to have accelerated this quarter, and revenues have remained relatively resilient with strong management focus," said Reynolds.
The Telecom Retail unit reported a 13 per cent fall in earnings in the second quarter to $176m, due to a decline in revenues of 7 per cent, partially offset by a reduction in costs of 3 per cent.
GEN-i's second quarter ebitda dropped 3 per cent to $118m, while external revenues were up 5 per cent.
At Chorus, ebitda fell 8 per cent in the latest three months to $137m, partly reflecting the start-up costs of the business, Telecom said.
Australian subsidiary AAPT had ebitda up 39 per cent to A$18m ($22.8m) in the second quarter, reflecting the success of cost reduction initiatives.
A second quarter dividend of 6 cents per share is to be paid, in line with the company's previously advised intention to pay dividends of 24cps in each of the 2009 and 2010 financial years.
Telecom's share price closed at $2.66 yesterday, down from a year-high of $4.13 last February but up from the year-low of $2.19 in November. It is now trading on the NZX down 10 cents a share at $2.65.
NZPA/CHRIS DANIELS