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Telecom New Zealand reports $3 billion net and announces web changes

Posted on 3-Aug-2007 10:36 | Filed under: News

Telecom reported net earnings today of $3,024 million for the 12 months to 30 June 2007, mostly boosted by a one-off abnormal gain of $2,084 million from the sale of the Yellow Pages Group.

Adjusted net earnings after tax was $955 million for the 12 months, an increase of 16.5% compared with the $820 million posted for the same period in 2006. Higher net earnings reflected lower tax expense and depreciation and amortisation costs.

According to the compay, the result included four abnormal items in the current 12 months listed below:

- a gain of $2,084 million recorded in April 2007 arising from the sale of the Yellow Pages Group
- a gain of $20 million on the sale of Telecom�s 90% stake in Telecom Samoa Cellular Limited (Q1 06/07);
- restructuring costs totalling $36 million ($24 million net of tax) as part of Telecom�s company wide organisational re-design
provision of $16 million ($11 million net of tax) for the cost of rectifying several billing issues, mostly relating to prior periods (the list of abnormals is at the end of this release).

"The fourth quarter was particularly busy with a number of highlights," said Telecom New Zealand chairman Wayne Boyd.

"We announced the appointment of Paul Reynolds as chief executive. Paul joins us from British Telecom where he has been managing that company�s wholesale business. We are looking forward to having Paul join us late next month," Mr Boyd said.

"And we are making good progress on our capital return programme following the sale of the Yellow Pages Group. We have a special shareholder meeting scheduled for August 17 in Wellington, which requires 75% shareholder approval. Assuming we get both court and shareholder consent the transaction should be completed in October.

"In June we announced that we would invest $300 million to build a WCDMA mobile network that will run alongside our 027 mobile network. The new network, due to be deployed in late 2008, will enable our customers to roam virtually anywhere in the world.

Acting chief executive Simon Moutter said the Q4 result was in line with expectations.

He also commented that mobile revenue growth is now slowing, reflecting competitive intensity and market penetration in excess of 100%. The company expects low single digit revenue growth to be sustainable in the current environment and bets that future revenue growth is likely to be determined more by applications and content.

Telecom retail is said to be on track to launch a Yahoo!XTRA closed portal services in the first half of 2007/2008. Customers will have access to personalised home pages, upgraded email and enhanced security services and increased online storage.

On the services front, Mr Moutter said Telecom�s IT business Gen-I had performed strongly in Q4 and for the full year with double-digit annual growth being posted in both periods.

In New Zealand, total operating revenue was $4,300 million for the 12 months, an increase of 1.2%, and $1,093 million for the June quarter, a 1.4% increase.

The company says the higher operating revenues for mobile, IT services and other operating revenue were partly offset by declines in interconnection, data and internet.

Total local service revenue was stable on $1,049 million.

Access revenues increased slightly but the gains were offset by a decrease in local call revenues which was due to businesses migrating from dial-up to broadband services.

Residential access lines dipped slightly by 0.8% to 1,403 million.

Calling revenue comprises national calling (national calls, calls to mobile networks and national 0800) and international calling (calls out of and into New Zealand and transit call traffic between destinations worldwide). This is the distribution for this line:

- National call revenue was $534 million, a decrease of 7.5%
- International revenue was $380 million, an increase of 11.1%
- Other revenue of $48 million was down 2%
- Total calling revenue was $962 million, a dip of 0.6%

Interconnection revenue, which includes termination of calls on both fixed and mobile networks, declined 8.2% to $146 million. The decline reflects the impact of lower mobile termination rates.

Mobile revenue is derived from voice and data services on Telecom�s 027 network (CDMA), with the following highlights:

- Total mobile revenues increased 5.4% to $816 million
- Voice revenues were down 0.8% to $522 million
- Data revenue increased 27.5% to $218 million
- Total connections at 30 June 2007 were 1,977,000 compared with 1,703,000 a year before
- Net mobile connection growth for the June quarter was 41,000, an increase of 2.1% on the previous quarter

Total ARPUs (average revenue per user � monthly) including interconnection were $43.10 for the 12 months

Mobile data revenue growth continues to be driven by services such as music downloads, text messaging, 3G broadband data use, with a total revenue decline of 3.9% to $421 million for the 12 months and by 6.3% to $104 million for the June quarter. Decreases in traditional data services were partly offset by an increase in Managed IP data services. Managed IP data services revenue increased 9.9% to $177 million. The decline reflected the migration away from legacy data products to new platforms such as One Office, and the reduction in wholesale data prices.

Total broadband revenue was $274 million, an increase of 3%.

Consumer revenue increased by 27.9% to $156 million. Business revenue declined by 37.3% to $69 million, reflecting the large reduction in business broadband pricing when business and residential prices were aligned in October 2006.

Total DSL (includes residential, business and wholesale) and mobile broadband connections of 653,000 at 30 June 2007, an increase of 40.4% from June 2006.

The IT revenue (mainly generated by Gen-i businesses) was $380 million, an increase of 9.8%. In the June quarter revenue was $116 million, an increase of 19.6%. Revenue from key contracts including the Ministry of Justice and Westpac bolstered overall IT revenues.

Australian operations showed a revenue decline to A$1,150 million, a decrease of 3.5%. EBITDA was A$44 million, down 41.3%. Loss from operations was A$26 million, a reduction of 65.8%