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Telecom Lifts Operating Performance In 1st Quarter

Telecom Lifts Operating Performance In First Quarter

Telecom today reported net earnings of NZ$151 million for the three months ended 30 September 2001, after the Group lifted its operating performance from the corresponding quarter last year.

Net earnings for the first quarter included additional funding and amortisation costs arising from Telecom’s move to 100% ownership of AAPT in December 2000. Excluding these costs, net earnings were NZ$166 million, up 3.1% on the comparable result of NZ$161 million for the three months ended 30 September 2000.

Group EBITDA for the quarter grew 5.3% compared to last year, with operating performance lifted by growth in revenues on both sides of the Tasman, and reduced costs in Telecom’s Wireline business in New Zealand.

Chief Executive Theresa Gattung said Telecom was on track with its transformation into an Australasian online and communications group.

Ms Gattung said an increase of 8.9% in total Group operating revenues for the quarter reflected strong growth in data revenues on both sides of the Tasman.

“We have also made good progress in reducing operating costs in Telecom’s core New Zealand operations over the past year and that was another significant driver in this quarter’s results,” she said.

New Zealand Wireline

Operating revenues in the New Zealand Wireline business increased by 2.0% from the corresponding quarter last year. Data revenue growth of 12.9% was the main driver, reflecting higher usage of services based on Internet Protocol and ADSL technologies.

“Telecom’s rollout of ADSL now enables more than 1 million customers access to our fast Internet services, and we continue to see solid takeup of these,” Ms Gattung said.

Telecom continued to compete vigorously in access and calling markets, partly through innovation in the packaging of telephony, Internet and entertainment in residential markets, she said. Approximately 14% of all Telecom residential customers are now on access packages.

Operating expenses in New Zealand Wireline business were down 4.9% from the corresponding quarter last year. “This reflects a broad range of initiatives over the past two years to reduce fixed costs and lift operating efficiency,” Ms Gattung said. “These initiatives have included our major outsourcing arrangements for information technology and call centre services, and greater efficiency in field force operations.”

The New Zealand Wireline business achieved EBITDA for the quarter of NZ$398 million, up 8.2% from the corresponding quarter last year.

Wireless

Ms Gattung said Telecom continued to develop its Wirelesses business in New Zealand and Australia, with a focus on positioning for the future in both markets.

Total mobile revenue in New Zealand grew 0.6% for the quarter despite divestment of the mobile radio business. At 30 September 2001, Telecom had 1.34 million cellular connections, up 30% on a year earlier.

The CDMA network in New Zealand, launched in July 2001, now has around 50,000 connections. Ms Gattung said this total was expected to reach 120,000 by June 2002.

The Group’s Australian cellular resale revenue grew 4.2% from the corresponding quarter last year, reflecting a 10.9% increase in customer numbers. Total Australian wireless revenues declined 2.7% due to lower mobile equipment sales.

Ms Gattung said Telecom had signed a wholesale capacity agreement with Vodafone Australia recently which would significantly improve the cost structure of the Group’s Cellular One business in the market for current-generation wireless services.

Total operating expenses in the Wireless business grew by 3.6%, with cost of sales in New Zealand down 19.5% due to a reduction in Telecom spending on handsets. Operating expenses overall included costs associated with the expansion of Telecom’s network operation following the launch of CDMA.

The Wireless business had EBITDA for the quarter of NZ$47 million, down 14.5% from the corresponding quarter last year.

International

Revenue growth was maintained in Australia, contributing to 24.1% growth in total International revenues (including the Telecom International Network business) for the quarter.

AAPT achieved a 61% increase in data revenue in the first quarter, reflecting the expansion of the VicOne managed data network programme in Victoria. TCNZA continued to grow data revenues in its contract with Commonwealth Bank Group and to pursue other major corporate contracts.

Ms Gattung said AAPT continued to develop and implement strategies aimed at improving margins in key areas of its business.

The International business achieved EBITDA for the quarter of NZ$56 million, up 19.1% from the corresponding quarter last year.

Internet and Directories Services

Ms Gattung said Telecom continued to show leadership in Internet businesses on both sides of the Tasman, with strong revenue growth for the quarter in Xtra (New Zealand) and in Connect (Australia).

Xtra’s revenue increased 33.3% compared with the corresponding quarter last year, with Xtra customer numbers up 25% to 392,000 over the year ended 30 September 2001. Connect achieved revenue growth of 26%.

Directories revenue declined 1.8%, reflecting differences between 2001 and 2000 in the timing of two regional directories.

Operating expenses in the Internet and Directories Services business rose 10.8%, driven largely by higher cost of sales associated with growth in business volumes.

The Internet and Directories Services business achieved EBITDA for the quarter of NZ$38 million, up 11.8% from the corresponding quarter last year.

Capex and dividend

Telecom has reduced its forecast capital expenditure for the year to 30 June 2002 from NZ$1.1 billion to NZ$900 million, as the Group maintains a tight reign on its use of capital resources.

Telecom will pay a fully-imputed quarterly dividend of NZ5.0 cents per share, unchanged from the first quarter of the 2000-01 financial year. 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.

Ends

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