Telecom first quarter in spotlight

By Phil Boeyen, ShareChat Business News Editor

Monday 13th November 2000

Investors will be watching Telecom closely tomorrow when it announces the first quarterly results to be affected by its new dividend ratio.

When the telco announced its final year results in August it dropped its dividend ratio to around 50% of net earnings. The previous ratio was to distribute at least 70% of net earnings, although the actual payout was mostly above the 90% level.

Following its signal to move to a growth rather than yield stock the TEL share price has fallen at times to trade below $5.30. However since it touched that level some re-rating occurred after finalising the takeover of Australian telco AAPT, and on the possibility of partnering with Japan's NTT DoCoMo in buying C&W Optus' mobile business.

Any move on the Optus mobile business is still up in the air, with Optus currently undertaking a review of all its Australian businesses.

Market analysts are picking Telecom's quarterly profit tomorrow to be around 20% lower than the same period last year, put under pressure from rising costs and a competitive mobile phone market.

One highlight of the week for Telecom will be the lighting up of its 50%-owned Southern Cross Cable on Wednesday. The other partners in the venture are C&W Optus and MCI Worldcom.

The cable has cost around US$1.2 billion and the company has already made sales of around the same figure. It has 35 customers who have signed contracts for 15 years for bandwidth on the fibre-optic cable, which links Australia and New Zealand to the US west coast.

Another sales round is currently underway and further customers should be on board by the end of this month.

Last week Telecom CEO Theresa Gattung patted her own company on the back for having the "guts and foresight" to make the entrepreneurial decision to go ahead with the cable five years ago.

The exact financial rewards that Telecom will gain for its 50% holding in the company have yet to be made clear, although Ms Gattung hinted last week that she will make some comment on the investment in tomorrow's profit call.

Whether that comment will give the market a clearer idea of the Southern Cross Cable's value to the company - or indeed whether Telecom is considering selling its share - remains unknown.

Earlier this year market speculation centred on spinning off the company's Southern Cross Cable investment, as well as its internet business and possibly the mobile business, but the speculation has remained just that.

Comments from our readers

No comments yet