Telecom touts underlying strength

By Phil Boeyen, ShareChat Business News Editor

Tuesday 14th August 2001

Telecom says its latest financial figures show an improvement in underlying performance despite an 18% drop in net profit.

For the year ended June the company made $643 million, down from last year's $783 million. Sales revenue rose to $5.85 billion from $4.34 billion previously.

The result includes $245 million in dividends received on Telecom's investment in the Southern Cross Cable Network and abnormal write-offs and provisions arising from the previously announced decision to close down the cdma wireless network project in Australia.

The $192 million after tax figure for abnormal items comprised mainly the write-off of AAPT's A$125 million expenditure on the cdma project until December 2000. The project was dumped earlier this year.

Chairman, Rod Deane, says the drop in net earnings largely reflects the move to 100% ownership of AAPT and tough decisions taken in positioning Telecom for the future on both sides of the Tasman.

"Group net earnings were impacted significantly by additional funding costs and amortisation of goodwill associated with the acquisition AAPT.

"The latest year has seen improvement in the group's underlying performance and the foundations are now in place for future years."

CEO Theresa Gattung says the company has delivered on a range of major undertakings over the past 12 months, including successful completion of the takeover of AAPT, which is a sound platform for expansion of the group's Australian presence.

Total group revenues grew by 29.6%, due largely to growth in Australian revenues of 48%.

Areas of growth in Australia included an 11.5% gain in AAPT's national call revenues, 133% in local service revenues and 111% growth in data revenues. Mobile revenues grew 13% for the year.

In New Zealand revenue growth for the year was modest at 1.4%, mainly on the back of growth in data revenues. Internet services revenue was up 18% for the year, with the Xtra customer base growing by 36%.

Mobile revenues in New Zealand grew 0.2%, with cellular revenue showing growth of 4 % for the fourth quarter.

Operating expenses in New Zealand were up 3.8%, an improvement on last year's 7.3% increase. For the fourth quarter operating expenses rose by 0.9%, which the company says is a continuation of a quarterly downward trend in expense growth.

Ms Gattung says the group is very focused on restraint in operating expenses on both sides of the Tasman.

"Expense growth is slowing while revenue growth continues - a very positive indication of the group's underlying performance."

Ms Gattung says the group is now looking at growth opportunities in Australia.

"Integration of AAPT into the group has been largely completed and we are developing strategies for each of the former AAPT business units, with a particular emphasis on improving margins in the Voice and Data business."

The company says it is also looking forward to further dividends from its Southern Cross Cable investment, although they won't match this year's payout and will fluctuate from year to year depending on sales of capacity on the cable network.

"We have previously indicated an expectation of dividends from Southern Cross of US$50 M million over each of the next three years, with the actual level and timing of those dividends dependent on future sales of cable capacity," says Ms Gattung.

Ms Gattung says Southern Cross has advised it that, owing to the slow down being experienced in a number of telecommunications markets around the world, demand for international bandwidth has become less certain.

"Consequently, the timing of future dividends may differ to that originally contemplated, although the expectation of dividends derived over the life of the project remain unchanged."

The company has kept its final dividend at the same rate as previous payouts, at 5 cents per share. That brings the year's total dividend to 20 cents, down from 46 cents last year in line with a revised payout policy announced last year.

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