As expected by analysts, Telecom's September quarter net profit after tax has plunged to $83 million, 49% down on the year-ago quarter's $163 million.If a one-off gain of $20 million from the sale of AAPT is included, profit was $103 million, a 37% fall.N
As expected by analysts, Telecom's September quarter net profit after tax has plunged to $83 million, 49% down on the year-ago quarter's $163 million.
If a one-off gain of $20 million from the sale of AAPT is included, profit was $103 million, a 37% fall.
NPAT included a $29 million dividend from the 50% Telecom-owned Southern Cross Cable - higher than most expectations.
Thanks in part to tight cost control (expenses were down 4% to $837 million), ebitda was stable at $443 million, 0.9% down on the year-ago quarter and again in line with expectations.
Revenue, at $1.32 billion, was down 2.9%.
The dividend was 3.5 cents per share, fully imputed, as expected.
“Operational performance was satisfactory with good cost control offsetting significantly higher regulatory costs and intensifying competition," chief executive Paul Reynolds said.
"Telecom absorbed $16 million of new regulatory costs [including the government's new rural broadband initiative, which makes money formerly given to Telecom contestable] and impact of the Canterbury earthquake of around $3 million, to achieve ebitdat that was on target and within market expectations,” chief executive Paul Reynolds said.
READ ALSO: Telecom in iSky talks | Reynolds not pondering future | Telecom loses mobile market share
Six monthly reporting
Incoming CFO Nick Olson announced Telecom would move to six-monthly reporting, but stick with quarterly dividends.
$2 million a month on Crown fibre
Mr Olson put the cost of engaging with the government's ultrafast broadband (UFB) tender at $2 million per month.
Around 100 Telecom staff - headed by seconded Chorus boss Mark Ratcliffe - are said to be working on the telco's bid.
Another contender - Wellington's TeamTalk, recently told NBR it has spent "several hundred thousand dollars" in total on its bid, and guestimates of rivals' total outlay were also dwarfed by Telecom's monthly spend.
Cold water on buyback
Mr Olson said UFB made the future uncertain for Telecom and that at the moment the company was "appropriately leveraged", pouring cold water on hopes for a buyback or special dividend.
The new CFO told NBR he was not ruling out a buyback, but that it would not happen until after the UFB question had been resolved.
Gen-i up
Of Telecom's divisions, Gen-i was again the star performer with ebitda jumping 38.5% to $54 million against the year-ago quarter.
XT seems to have played a part, with mobile revenue increasing 9%.
The quarter also indicated that Gen-i will see more strong times ahead, landing big deals that included a monster contract with the Department of Corrections.
However, overall a lower value of contracts was closed: $170 million versus $305 million in Q1 FY10
Retail up, but mobile down
Telecom Retail reported ebitda up 161% to of $108 million, fuelled the growth in XT, and lower customer churn in broadband.
As of September 30, 839,000 customer connections were on XT, or around 40% of Telecom's mobile base.
Around 25% of retail phone sales are now smartphones, which Dr Reynolds said was lifting arpu. Again, The Telecom chief executive continually name-checked Google's Android smartphone platform, to the exclusion of mentioning any other handset maker.
However, Telecom's total number of mobile customers was "slightly down", Dr Reynolds said. (For stats read Telecom loses mobile market share).
The TelstraClear effect
The Telecom chief executive blamed the net loss on a "large wholesale CDMA customer" (read: TelstraClear moving its 30,000 mobile customers to Vodafone).
Dr Reynolds said every customer who upgraded from CDMA to XT did deliver higher arpu (average revenue per month).
AAPT down
As expected by analysts, Telecom's wholly-owned Australian division, AAPT, was the weak link, reporting adjusted ebitda of $A22 million, a 24.1% decrease on the year-ago quarter.
The good news: the recent sale of AAPT's retail business to iiNet, plus the sale of Telecom shares in its transtasman investments iiNet and Macquarie, generated $A139 million in net cash.
Wholesale and International
Wholesale and International reported adjusted ebitda of $37 million for the quarter, a 31.5% decrease.
Internal cost growth was blamed.
“The quarter featured strong access and broadband connection growth, including 19,000 new access connections and 18,000 new broadband connections," said acting chief executive Nick Clarke.
The International division is still for sale.
Chorus was flat, with ebitdta down 1% to $192 million.
The following guidance was provided. All is broadly in line with a previously issued downgrade. Projected NPAT for 2011 bumped up $30 million but as always, no allowance is made for the UFB:
FY11 Guidance
• Depreciation and amortisation of $1.00 billion to $1.06 billion
• Effective tax rate of around 33%
• Adjusted Net Earnings of $330 million to $370 million
• Capex of $1.0 billion to $1.1 billion
FY12 Guidance
Adjusted EBITDA to increase by $20m to $80m
Effective tax rate of 25% to 28%
FY13 Guidance
Adjusted EBITDA to increase by $20m to $80m
Effective tax rate of 25% to 28%
Capex around $0.75b
