Market likes Telecom direction

By Phil Boeyen, ShareChat Business News Editor

Tuesday 13th November 2001

The market has approved of Telecom's (NZSE: TEL) first-quarter result, rating the stock upwards on the back of a better operating result and lower capital expenditure plans.

Although profit for the three months ended September fell 6.2% to $151compared with last year, net earnings rose 3.1% to $161 million, excluding costs associated with last year's purchase of AAPT.

Telecom says group earnings before interest, tax, depreciation and amortisation for the quarter grew 5.3% compared to last year, with operating performance lifted by growth in revenues on both sides of the Tasman and reduced costs in its Wireline business in New Zealand.

Chief executive, Theresa Gattung, says an increase of 8.9% in total group operating revenues for the quarter reflected strong growth in data revenues on both sides of the Tasman. Sales revenue rose to $1.4 billion from $1.29 billion last year.

"We have also made good progress in reducing operating costs in Telecom's core New Zealand operations over the past year and that was another significant driver in this quarter's results," says Ms Gattung.

Data revenue led the growth in the company's fixed line business in New Zealand, rising 12.9% because of higher Internet Protocol and ADSL usage. Operating revenues over the whole Wireline business grew 2% over the first quarter last year.

"Telecom's rollout of ADSL now enables more than 1 million customers access to our fast internet services, and we continue to see solid takeup of these," says Ms Gattung.

Wireline's operating expenses fell 4.9% as the company focused on reducing fixed costs and lifting operating efficiency.

In the much-watched wireless market Telecom's New Zealand revenues grew only 0.6% despite the roll-out of CDMA but the company points out it has divested its mobile radio business.

The company now has 1.34 million cellular connections, up 30% on last year. The much-vaunted CDMA network has 50,000 connections and is aiming for 120,000 by the end of the financial year in June 2002.

Mobile revenues dipped by 2.7% across the Tasman due to lower equipment sales but cellular resale revenue was up 4.2%.

The company recently signed a wholesale capacity agreement with Vodafone Australia, which it says will significantly improve the cost structure, its Cellular One business.

The Wireless business had Ebitda for the quarter of $47 million, down 14.5% on the same period last year.

Telecom reports revenue growth was maintained in Australia, contributing to 24.1% growth in total international revenues, including the Telecom International Network business.

"AAPT achieved a 61% increase in data revenue in the first quarter, reflecting the expansion of the VicOne managed data network programme in Victoria. TCNZA continued to grow data revenues in its contract with Commonwealth Bank Group and to pursue other major corporate contracts," the company says.

International Ebitda rose 19.1% to $56 million for the quarter.

One of the highlights of the first quarter results is Telecom's continuing strength in its internet divisions, with Xtra's revenue up by a third and customer numbers up by a quarter compared with last year.

Across the Tasman the Connect service is also doing well, growing revenue 26% for the first three months of the year compared with previously.

Directories Services revenue declined 1.8% but the telco says this reflects differences between 2001 and 2000 in the timing of two regional directories.

The Internet and Directories Services business recorded Ebitda for the quarter of $38 million, up 11.8% from the corresponding quarter last year.

At the end of the first quarter Telecom says it has reduced its forecast capital expenditure for the current financial year from $1.1 billion to $900 million, as it maintains a tight reign on its use of capital resources.

A quarterly dividend of 5 cents per share will be paid.

Comments from our readers

No comments yet