Telecom FY earnings to be at bottom end of guidance on fixed-line rivalry, Gen-i squeeze

Thursday 16th May 2013

Telecom, which is aiming to cut its workforce by as much as 16 percent this year, said annual earnings will be at the low end of guidance because of competition in fixed-line sales and a margin squeeze at its Gen-i unit.

Adjusted earnings before interest, tax, depreciation and amortisation would be between $1.04 billion and $1.06 billion, the company said in a statement, reiterating the forecast range.

"Management expect that the result will be near the bottom end of this range, primarily due to a further increase in price competition in the fixed line market and continued margin pressure in Gen-i," chief executive Simon Moutter said in the statement ahead of the company's investor day today.

The earnings forecast excludes one-time restructuring costs, which are now expected to be greater than previously estimated. For 2013, one-time restructuring costs are expected to be in a range of $100 million to $130 million, up from the assessment in March of $70 million to $80 million. About half the costs are non-cash items, it said.

Telecom is aiming to cut the number of full-time equivalent workers to between 6,300 and 6,600 by mid-2013, from the 7,530 on its books at Dec. 31. That will trim its payroll costs be between $100 million and $120million a year, the company said today. The figures exclude 140 workers gained with the acquisition of Revera.

Capital spending guidance is unchanged at about $460 million for 2013 and the company sees capex averaging $400 million to $500 million in coming years, depending on the timing of payments for spectrum.

Telecom shares last traded at $2.62 and have climbed 18 percent this year. It is rated 'underperform' based on 10 analysts polled by Reuters.

BusinessDesk.co.nz

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