Telecom struggles to hit the high notes following Chorus demerger

24 Aug 2012

Telecom New Zealand has announced operating revenues of NZD4.576 billion (USD3.732 billion) for the twelve months ended 30 June 2012, down 8.6% on the NZD5.004 billion recorded a year earlier. EBITDA increased by 41.8% from NZD761 million to NZD1.079 billion year-on-year, and net earnings from continued operations reached NZD1.157 billion. CAPEX for the twelve-month period dropped 42%, to NZD528 million. Telecom notes that the period under review includes five months of trading before the structural demerger of its infrastructure business, Chorus, on 30 November 2011, and seven months of post-demerger trading. As such, the results include a large non-cash accounting adjustment relating to the demerger of Chorus, as well as several other one-off items. Taken together, these adjustments make prior year comparisons ‘complex’, it said. In 2011 Telecom agreed to the structural separation of Chorus from the rest of the company, in order to secure the contract to roll out the bulk of the country’s Ultra Fast Broadband (UFB) initiative.

Chris Quin, acting CEO of Telecom New Zealand, commented: ‘Telecom has delivered a satisfactory result in a year that included the Chorus demerger, and the subsequent establishment of Telecom as a new fixed line and IT services provider and mobile network operator. Telecom’s operational performance reflects an increasingly competitive market and is in line with guidance. Following the creation of a new industry model post demerger, we expect strong competition to continue, with increasing consolidation … There have been a number of one-off changes affecting the year-on-year revenue trends, relating to the rationalisation of low margin customers in our international business and in Australia, the impact of mobile termination rate (MTR) regulation and the effect of the AAPT consumer division sale part-way through the prior year. When these declines are ring-fenced the New Zealand business revenues fell around 2% for the year. Core business such as domestic fixed line access, calling and data continue to decline and are partially offset by growth in mobile and broadband.’

New Zealand, Chorus (New Zealand), Spark, Spark New Zealand Group