Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Telecom 'fast, fair and fearless' restructure on the way

Telecom 'fast, fair and fearless' restructure will have 'material' impact

By Paul McBeth

Feb. 22 (BusinessDesk) - Telecom Corp's annual earnings face a material impact from a major overhaul of the business to become a data-driven and mobile-focused telecommunications operator, stripping out more costs and getting away from its old structure.

Chief executive Simon Moutter told an analysts' briefing that Telecom's structure is still based on its vertically integrated history as both network owner and retailer, before the split that saw network company Chorus established as a standalone entity.

Telecom now needs a rapid change to get the company on track towards sustainable profitability, Moutter says. That could have a material impact on the company's earnings, with another update promised at an investor day in May.

"We must have a competitive cost base to succeed in today's fast-changing marketplace," Moutter said. "We are talking about the potential for one-off restructuring costs and portfolio formation that can crystallise one-off costs in the period."

The phone company has focused on stripping out costs for several years as customers' expectations for cheaper services coincided with heavier regulation of monopoly elements of the network that Telecom now no longer owns. Since shedding the Chorus network unit at the end of 2011 and the relevant regulatory regime, the company is now looking at how to position itself in the new marketplace.

"We're shifting from a company focused on building things to a company focused on its products and services," Moutter said.

Telecom firmed up its annual earnings guidance, saying adjusted ebitda will probably be between $1.04 billion and $1.06 billion, before any one-off charges from the restructuring. That's down from $1.09 billion a year earlier, and is at the lower of the previous guidance of flat to single digit decline in annual adjusted ebitda.

Moutter said Telecom is giving up margin at the expense of maintaining its market share amid intense price competition for broadband customers, something it can't afford to keep doing.

"We're not going to downplay the change, nor sugar-coat the impact on a number of our people," he said. "We will do things fast, fairly, and fearlessly."

Moutter said there is potential for write-downs if Telecom exits any of its businesses and won't simply be focused on labour costs, although hundreds of jobs could be at risk.

"We want to optimise the business around areas of highest value to the customer," he said.

Telecom today eked out a 3.7 percent increase in adjusted earnings before interest, tax, depreciation and amortisation, which rose to $506 million in in the six months ended Dec. 31. The company's sales fell 8.5 percent to $2.14 billion, with mobile the only unit to report a gain, rising 2.2 percent to $455 million, making it the biggest earner for the company.

Statutory net profit plunged 84 percent to $162 million, or 9 cents per share, from a period when shareholders reaped $877 million from the distribution of Chorus shares. Stripping out the Chorus effect, profit rose 26 percent.

The shares rose 1.1 percent to $2.23 today. The stock is rated an average 'hold' based on 10 analyst recommendations compiled by Reuters, with a median target price $2.30.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Auckland Surge, Possible Peak: House Values Accelerate At Fastest Annual Pace In 8 Years

New Zealand residential property values rose at their fastest annual pace in eight years in August, pushed higher by overflowing demand in Auckland, which is showing signs speculators think it has reached its peak, according to Quotable Value. More>>

ALSO:

Cash Money: Reserve Bank Launches New $5 And $10 Banknotes

The $5 and $10 final banknotes were revealed at an event at the Bank in Wellington, and will start to be released from mid-October 2015. More>>

ALSO:

Truck Sales Booted: Commerce Commission Files Charges Against Mobile Trader

The Commerce Commission has filed charges against a mobile trader, or truck shop operator, claiming he obtained money from customers by deception and never intended to supply them with the goods they paid for. More>>

ALSO:

Planes: Jetstar Launches Regional Network

Jetstar, the Qantas Airways budget offshoot, launched its new regional network in New Zealand with special $9 one-way fares and has narrowed down its choices to five routes and four destinations - Nelson, Napier, New Plymouth, and Palmerston North. More>>

ALSO:

Fisheries: Report On Underrsize Snapper Catch

The report found that commercial fishers caught 144 tonnes of undersized snapper in the Snapper 1 area – about 3% of the total commercial catch – in the year ending February 2015. The area stretches from the top of the North Island to the Bay of Plenty and is one of New Zealand’s most important fisheries. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news