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Telecom Lifts Half Year Earnings

Telecom today reported net earnings of NZ$312 million for the half year ended 31 December 2001, up 4% on the previous corresponding half year as the Group maintained growth in total revenues and made solid progress on cost control.

Net earnings for the quarter ended 31 December 2001 increased 15.8% to $161 million, due partly to a 0.8% reduction in operating expenses compared with the corresponding quarter of 2000.

Group EBITDA for the half year grew 9% to $1,101 million with Telecom’s four business divisions all increasing their EBITDA performance.

Chairman Roderick Deane said Telecom was performing well, given slowing rates of growth in telecommunications markets on both sides of the Tasman.

“Management has made good progress addressing costs especially in the New Zealand Wireline business. This strengthens Telecom’s position in the current environment,” Dr Deane said.

“At the same time, data and Internet continue to be areas of significant revenue growth and that helps build the platform for Telecom businesses of the future.”

Chief Executive Theresa Gattung said performance in the Group’s Australian businesses was improving, with a major focus on operating margins within AAPT and Cellular One, and on growing the internet and data services of Connect.

“Telecom is making steady progress in Australia, building our position in market segments of higher value to each business and streamlining many of our business processes to reduce cost and raise customer service levels,” Ms Gattung said.

“Overall, Telecom remains on track with its focus on delivering solid bottomline performance,” she said.

New Zealand Wireline

The New Zealand Wireline business achieved EBITDA of NZ$795 million, up 5.2% on the previous corresponding half year.

Operating expenses fell 5.1% for the half year and 5.3% for the second quarter, due to a range of initiatives to increase efficiency and remove duplication of resources. Revenues increased by 0.4% for the half year, which reflects slowing growth in calling market revenues.

Growth in data revenue continued with an increase of 11.0% for the half year. This was driven by higher customer takeup of ADSL and IP network services.

Wireless

The Wireless business achieved EBITDA for the half year of NZ$134 million, up 10.7% on the previous corresponding half year.

In New Zealand revenue was stable while cost of sales decreased by 9.2% for the half year, resulting in 19.0% growth in gross margin.

Average revenue per user (ARPU) for postpaid customers increased to $73.70 per month for the second quarter up from $71.20 per month for the first quarter of the current financial year.

Telecom’s CDMA network in New Zealand now has around 110,000 connections. Total mobile connections were 1,379,000 at 31 December 2001.

In Australia, the new resale agreement with Vodafone has improved the cost structure of Cellular One and cost of sales in this business decreased by 14.2% for the half year. Cellular connections at 31 December 2001 were up 8.0% compared with a year earlier.

International

Telecom’s International business (which includes the Australian businesses of AAPT, TCNZA, and Telecom Network International) achieved EBITDA for the half year of NZ$119 million, up 14.4% on the corresponding period in 2000.

In line with earlier indications, revenue growth slowed in the Australian businesses and this was matched by a slowdown in expense growth. Data revenues continued to grow strongly with AAPT recording a 39.3% increase for the half year.

Internet and Directories Services

The Internet and Directories Services business achieved EBITDA for the half year of NZ$69 million, up 23.2% on the corresponding period last year.

Xtra’s Internet revenue grew 36.1% for the half year. Average hours per active customer per month increased 32.9% on the corresponding six months last year.

In Australia, Connect’s Internet revenue for the half year was up 11.9%.

Directories revenue was stable compared with the corresponding period in 2000.

Operating expenses in the Internet and Directories businesses increased 7.9%, driven in part by the higher cost of sales associated with growth in this business.

Balance sheet

Telecom continued to strengthen its balance sheet through constraint on capital expenditure, successful refinancing of long-term debt and retention of earnings.

For the half year, capital expenditure was down 38.4% compared with the corresponding period in 2000 as the Group maintained tight control on its use of capital resources.

Forecast capital expenditure for the year to 30 June 2002 is NZ$900 million after a reduction in the full year forecast, announced last November, from NZ$1.1 billion.

During the quarter ended 31 December 2001, Telecom undertook issues of seven and ten year debt, raising $1.3 billion. These funds were used to pay down short-term debt, which enabled Telecom to achieve the desired maturity profile for its borrowings.

Dividend

Telecom will pay a fully-imputed quarterly dividend of NZ5.0 cents per share, unchanged from the first quarter of 2001-02.

Shareholders who opt to receive shares in lieu of cash dividends will be offered those shares at a discount of 3% to the price calculated under the Telecom Dividend Reinvestment Plan. The dividend will be paid in New Zealand and Australia on 22 March 2002, with a books closing date of 8 March. The New York Stock Exchange books closing date will be 7 March, with dividend payment on 29 March.

Ends

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