Telecom result turns out flush but not flashy

Friday 6th August 2004

Small investors piled into Telecom shares yesterday after the telecommunications giant delivered a long-expected lift in its dividend payout.

The dividend rise means Telecom will pay out $133 million more than it did in 2003.

At midday the shares were trading at $6.25, up 9c on their Wednesday close.

The $754 million annual profit was toward the top of the range of analysts' estimates and was 6.3% up on the previous year. Adjusted net earnings were $775 million.

Telecom said it was happy with the consensus guidance of $820 million for next year "but don't believe we will do much more than this."

The market's focus on the dividend and expected capital management initiatives, which failed to surface obscured another hefty fall in debt. Net debt was down by $938 million, or 20%, to $4.69 billion.

The resulting lower interest bill, said chief executive Theresa Gattung, was one of the principal drivers of the higher bottom line.

The other was growth in operating revenue, which rose 3.1% to $5.3 billion although expenses rose too, by 4.6% to $3 billion.

Chairman Roderick Deane said operating margins remained stable despite "significant price pressures."

The company highlighted its capital expenditure commitments over the next few years.

Plans to replace 600 exchanges with next-generation Alcatel ISDN exchanges over the next eight years were announced without a price tag.

The big numbers were $125 million over five years on increasing the capacity of the core fibre network; $120 million over five years on extending fibre-to-the-curb, $10 million trialling fibre-to-the-premises; and $110 million on extending data services over the copper lines network.

The minimum dividend payout rises to 75% of net earnings after adding back amortisation and relevant non-cash items, from 70%.

Deane said the company was targeting an 85% payout this financial year.

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