Telecom has this morning reported second quarter results in line with analysts' guidance.
For the three months to December 31, net profit after tax fell 23.8% to $80 million from the year ago quarter's $105 million.
Revenue was softer than most analysts expected, falling 6.1% to $1.31 billion (versus analysts consensus of $1.34 billion).
Ebitda rose from the year-ago $418 million to $426 million as costs were cut more aggressively than revenue fell. Adjusted year to date Ebitda was NZ$872m, a 1.4% decline on the first half of the previous financial year.
A six cents per share dividend was recorded, as previously flagged.
One downside surprise was the dividend from the 50% Telecom-owned Southern Cross Cable, which came in at $9 million. Analysts had been expecting $30 million to $40 million.
Full-year profit will be at lower-end of range
In a statement this morning, Telecom said “Full year earnings guidance of ebitda growth between -1% and +2% remains in place, with ebitda growth now expected to be in the lower half of that range, reflecting the impacts of the economic downturn and the 27 January [to 29 January] 2010 XT mobile outage.”
The number of XT connections grew to 467,000 by December 31 when the quarter closed - allowing for CDMA upgrades and churn, a net gain of 60,000 - a majority prepay.
Roaming revenue doubled.
Alcatel Lucent could pick up the tab
Craigs Investment Partners analyst Geoff Zame expects Alcatel-Lucent to pick up the tab for the $5 million in customer compensation dished out after the January 27-29 outage.
However, Telecom now faces a stiffer marketing challenge. Forsyth Barr analyst Guy Hallwright sees XT customer targets falling up to six months behind.
Telecom also faces potential increase in capex, having publically pledged to install two extra radio network controllers or RNCs today (currently Vodafone has six for its 3G network, and Telecom two for XT, covering a geographically wider area each).
RNCs cost up to $US12 million a pop, one of Alcatel-Lucent's competitor's told NBR. However, again, Alcatel-Lucent may be asked to come to the party.
Telecom chief executive Paul Reynolds told NBR the two RNCs were always planned, and would not add to capex. Processing power of the two existing RNCs was doubled after the outage, said Dr Reynolds.
Telecom assessed the ebitda impact of the economic slowdown as $10 million, as per its previous five quarters.
Most divisions flat, but Gen-i stars
Chorus - the telco's networking division - recorded flat ebitda at $186 million.
Wholesale and International reported ebitda of $62m for the quarter, a 1.6% decrease on the equivalent quarter last year.
Telecom Retail reported ebitda of $82m for the quarter, a 7.9% decline on the equivalent quarter last year. While mobile grew slightly and Telecom's retail broadband DSL share held steady at 57%, the once cornerstone local calling business continues its slow but steady decline, falling from $261 million revenue in the year-ago quarter to $254 million.
AAPT reported Ebitda of $28m for the quarter, flat on the equivalent quarter last year.
Gen-i reported ebitda of $60m for the quarter, a 9.1% increase on the equivalent quarter last year.
“Gen-i’s increase in ebitda was driven by IT Solutions growth, strong performance from our Australian business, and a focus on lowering costs,” said Chris Quin, CEO, Gen-i. However, the current quarter has seen Gen-i run into headwinds generated by the XT outage, include a halt being called on one of its largest mobile contracts - Fonterra's move from Vodafone 3G and CDMA, as first reported by NBR.
No let up
Mr Quin told NBR that while he was pleased with his division's 9% year on year ebitda growth, it had been hard won. "Recessionary pressure has not given away at all" in Gen-i's chase for private business. In the government section, departments are feeling the squeeze from cost cutting efforts.
Below: business unit results by revenue.
Little slice of Vodafone Australia pays off
Telecom also said today that its 5% share in Vodafone-Hutchison Australia (created in June by the merger of Vodafone Australia with the 10% Telecom-owned Hutchison Telecommunications) had been revalued at $NZ202 million, directly aligned to the company's ASX-listed shares.
Telecom lost its board seat at the time of the merger.
In June, the Hutchison stake was worth around $A150 million.
Telecom bought into Hutchison in 2000, at the height of the tech boom, for around $A400 million..
Telecom (NZX: TEL) shares were down 1.31% to $2.28 in mid-afternoon trading, close to the low-end of the company's 52-week range.
Fri, 12 Feb 2010