Lost direction takes toll on Clear staff

By Richard Braddell

WELLINGTON - Clear Communications is to slash 150 "positions" from its 900-strong payroll after plunging into a $961,000 loss in the March 1999 financial year.

The loss, which follows a halving of net profit to $9.2 million in the 1998 financial year, comes as no surprise given the pressure on Clear's traditional money spinner, residential long-distance calls.

But this year's loss would have been little short of $10 million, but for some "income smoothing" centred on its ongoing interconnection dispute with Telecom.

A note to the accounts reveals that in the last year financial year, Clear has changed the accounting treatment of the interconnection revenues it is withholding pursuant to the dispute.

"Clear's directors do not accept Telecom's claim and consider that it is unlikely that any significant liability will eventuate," the note said.

Clear expensed withheld interconnection revenues against profit in the 1998 financial year, but reversed them in 1999, thereby reducing expenses by $9 million.

Meanwhile, a net $12 million liability for interconnection fees was not recognised in the latest accounts.

Clear's managing director, Tim Cullinane, accepted that it was "arithmetically correct" that the 1999 loss would have been closer to $10 million but for the accounting change, but Clear viewed the charges withheld as illegal and the change had been made with the approval of auditors.

With regard to staffing, Mr Cullinane accepted there had been industry comment that the company's head count was too high, but said the reduction in numbers was related to the transition of the company from reliance on the tolls market to one of being the leading internet supplier to the business community.

"We are also looking to turn around the traditional tolls business which involves stimulating prices," he said.

While losing 150 positions was a tough decision to make, it was the correct business decision, he said.

But the loss comes less than a week after Clear's new owner, British Telecom, placed a $170 million vote of confidence in the company by paying off all its debt.

"BT is taking a long-term view and will be prepared to sacrifice short-term profits while it moves to upgrade Clear's infrastructure and position it as a more capable, more aggressive competitor leveraging BT's international services and capabilities," Mr Cullinane said.

Cashflows will be ploughed back into development of the on-line business which Mr Cullinane said was still in the start-up phase.

Clear's future has been the subject of conjecture with suggestions that talks between British Telecom and Telstra over a possible ownership joint venture had faltered over price.

Telstra, which has made significant inroads into the corporate market in New Zealand, is faced with either buying or building facilities of its own as its business expands.

But BT is thought to have paid top price for the 75 per cent of the company owned by TVNZ, Todd Corporation and MCI Corporation and would want to recoup some of that cost.

Some clues as to the price are contained in TVNZ's annual report which indicates that it received about $217 million for the sale of its stakes in Sky TV, 25 per cent of Clear and another small business.

The Sky stake was sold for $127 million suggesting that 25 per cent of Clear went for in excess of $85 million, valuing the entire company at more than $340 million.