Telecom closes unprofitable Ferrit shopping site

Monday 12th January 2009

Telecom is closing its Ferrit shopping website, saying tough retail market conditions mean the venture won't be profitable for years.

The decision ends a three-year effort to develop the site, backed by a television advertising campaign. Telecom's shares fell 0.4% to $2.40 and have gained 5.2% since the start of the year.

"Ferrit has continued to grow during the past three years but the current retail environment has meant the break-even point has shifted out a number of years," said Alan Gourdie, Telecom Retail chief executive. "The decision has now been made to refocus and resources will be directed to other areas."

Earnings at Telecom have declined since a government edict forced the company to separate its wholesale and retail units as part of a plan to increase competition in high-speed internet services. The phone company faces dwindling revenue from its biggest, fixed-line network as more New Zealanders migrate to mobile phones, a market where Telecom competes with the world's biggest operator, Vodafone.

The company faces increased rivalry from companies offering local calling services after it was forced to unbundle its so-called local loop.

Last month, Moody's Investors Service said it may cut Telecom's A2 long-term credit rating citing "ongoing challenges ahead for the company's core businesses," the impact of recession and prospects of weakening financial position as it takes on more debt to fund growth and maintain dividend.

The decision to close Ferrit is part of the company's focus on the delivery of its core services, Gourdie said today.

Telecom has "significant commitments and investment in next generation broadband and mobile technology."

Ferrit will stop taking online orders on January 14, the company said.

By Jonathan Underhill

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