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Telecom's Delivery Of Strategy Underway

Telecom's Delivery Of Strategy Underway With Transformation In Full Flow

Telecom New Zealand today announced earnings before interest tax depreciation and amortisation (EBITDA) of $1,891 million for the year ended 30 June 2008, in line with guidance.

Total revenue for the year was $5,673 million, a 2% increase on the prior year, while expenses rose 5% to $3,782 million, in part reflecting the costs of transformation and operational separation. This resulted in a 4% decline in EBITDA.

Net earnings for the year were $713 million.

Telecom CEO Paul Reynolds said that during a period of profound change Telecom had delivered a good result in line with the guidance.

“Telecom is now operationally separated, a new leadership team has been appointed, and the implementation of our transformation is in full flow,” said Dr Reynolds.

“In our April 10 market briefing we said we would invest for growth and long term health and focus on new wave broadband, mobile and IT services as our path back to profit growth. This process is now well under way.

“Our fibre-to-the-node (FTTN) rollout is progressing well, with 33 cabinets in place by 30 June, and ADSL2+ technology is now available from cabinets or exchanges to 50% of all broadband end users throughout New Zealand. This investment will allow more New Zealanders to enjoy faster broadband than ever before.

“Revenue from IT services for the quarter grew nearly 20% when compared to the same period last year and the build of our new WCDMA mobile network is also progressing apace. We are evaluating the further potential of WCDMA at 850 MHz.”

Dr Reynolds said the year’s result also highlighted the increasingly competitive nature of the New Zealand telecommunications landscape.

“In this new environment customers have more choice and opportunities than ever before.

“The trend of migration of fixed line customers from retail to wholesale continues, and UCLL-based competition is hotting up,” he said.

Depreciation and amortisation increased by 17% on the previous year, as Telecom increases its capital expenditure and moves to equipment with shorter lifecycles.


Click to enlarge

All figures are in New Zealand dollars unless otherwise stated.

Q4 Performance Highlights

Broadband and internet

Broadband and internet revenue increased nearly 6% on the equivalent quarter in the prior year.

More than 40,000 net broadband connections were added during the quarter, with Telecom Retail securing 56% of those connections.

IT Services

IT services revenue was up nearly 20% for the quarter when compared to Q4 07.

Managed data revenues have also increased, reflecting growth in market share and increasing use of data services with current clients.

Mobile

Dr Reynolds said that Telecom’s mobile operation had had a challenging quarter, seeing a nearly 7% decline on the previous year’s equivalent quarter’s mobile revenue, reflecting price cuts and increased competition.

“Nevertheless the fact that post-paid mobile connections have returned to growth reflects the success of retention initiatives such as half price international roaming and re-sign and upgrade initiatives targeted at high-value customers,” he said.

Mobile broadband has also grown, with the passing of the milestone of 100,000 mobile broadband devices sold and the launch of the T-Stick USB modem.

Telecom Wholesale

Telecom Wholesale saw revenue increase 15% year on year, with non-interconnect revenue growing 28%. Wholesale successfully launched its basic unbundled bitstream access (UBA) product in July.

Australian operations

Australian full-year EBITDA was AU$82m, which slightly exceeded guidance.

“Integration of AAPT and PowerTel is now largely complete, and the wholesale and business segment transformation is ongoing with the focus on profitable ‘on-net’ sales,” he said.

Guidance

Looking ahead, Group EBITDA is expected to decline by 4% to 6% in the year to 30 June 2009 (and in line with guidance given on 10 April 2008). Capex over this same period is forecast to be up to $1.1 billion.

Dividend

Telecom has declared an ordinary dividend of 8 cents per share for the quarter bringing cumulative dividends for the year to 29 cents.

Telecom’s big year: highlights

• Undertakings on operational separation signed on 31 March.
• Chorus business established and operating.
• 33 FTTN cabinets installed by 30 June, and 53 by 8 August.
• New leadership team members announced, including CFO, chief transformation officer and CEO Retail.
• ADSL2+ available to 50% of all broadband end users.

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