Telecom’s results solid if uninspiring

5 Feb 2003

National PTO Telecom New Zealand [New Zealand: TEL.NZ] posted net earnings of NZD301 million for the six months to 31 December 2002, down 3.5% on the NZD312 million reported in the corresponding 2001 period. The fall was attributed in part to a boosting of one-off gains in last year’s results associated with the prepayment of cross-border leases, the sale of international network capacity and a lower amortisation charge related to the write-down of the group’s investment in AAPT. Adjusting for these variables, Telecom’s profits rose by 4.2% year-on-year from NZD289 million. However, reported group revenues dropped by 8.4% from NZD2.845 billion to NZD2.605 billion, in the wake of what Telecom chairman Dr Roderick Deane termed ‘the double handicaps of a tough telco sector and a regulatory environment which is imposing growing burdens on the company’. Nonetheless, in the year to 31 December 2002 the company strengthened its balance sheet, repaying approximately NZD600 million in debt – racked up in the NZD2.2 billion purchase of AAPT – and improved operating cashflow, which rose by 50.1% in the latter half of the year to NZD776 million. The group’s Australian subsidiary turned cash flow positive for the first time since it was bought in 2000, moving from a deficit of NZD50 million to NZD42 million in the black, but still dragged down the company overall.

Operationally speaking, New Zealand Wireline – comprising fixed line and VAS services to residential and business users – saw operating revenues fall by 1.5% as a consequence of reduced interconnection and calling revenues, although take-up of its ADSL-based JetStream package doubled to 54,000 boosting ADSL revenues by 78.6% in the half year. New Zealand Mobile, which runs CDMA and TDMA networks, increased EBITDA by 25.2% in 2H. CDMA connections reached 241,000 by 31 December 2002, a market share of 20% and now stand at 250,000, around 28,000 of whom can access the fast data Mobile JetStream service. The group’s International division, which provides New Zealand and Australia with outward and inward calling, managed international data services and carries global transit call traffic, recorded a 29.2% drop in revenues, although Telecom was quick to point out that the fall was due in the main to the strengthening of the local dollar.

New Zealand