Daily ShareChat: Telecom

By Jenny Ruth

Thursday 22nd April 2010

Telecom's earnings downgrade last week included a number of items already flagged to the market, particularly the impact of changes to the rural service regime and the impact of outages on its XT mobile network, says Goldman Sachs JB Were analyst Tristan Joll.

The mid-points of Telecom's guidance was for operating earnings to be $1.75 billion, down from $1.84 billion previously, for the year ending June 1011, $1.8 million for the following year, down from $1.93 billion previously, and $1.85 billion for 2012, down from $2.02 billion previously. Joll's forecast for 2011 was already down to $1.75 billion while his 2012 forecast below Telecom's new guidance at $1.76 billion, as was his 2012 forecast at $1.79 billion.

The changes to the rural service regime will cost Telecom $56 million. At last week's audio conference, Telecom said it had 585,000 XT customers at March 31 and has maintained a reasonable conversion momentum despite predictably poor net additions.

Chief executive Paul Reynolds' comments suggest a greater determination to reduce the burden of now redundant separation obligations and an openness to a wider range of ultra-fast broadband solutions, Joll says.

"While Telecom stopped short of endorsing full structural separation, we believe the company is signalling greater willingness to contribute assets to local fibre companies and/or work co-operatively with other players."

BROKER CALL: hold.

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