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

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news