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Telecom profit falls sharply

Telecom profit falls sharply

Gen-i's earnings fall in fourth quarter.

Telecom has reported (pdf) an annual profit of $398 million, down from $710 million last year, but still $12 million above analysts’ expectations.

Revenue for the year fell 1.5 percent to $5.587 billion. Local calling, calling, interconnection and mobile revenue were all down year on year while broadband, IT services and data revenues saw growth.

The company confirmed a 6 cent dividend for the final quarter, payable on September 18.

"This was a big year for Telecom in which we made significant operational and service improvements on a broad range of fronts. Telecom is getting it right as we invest and re-build with the aim of returning to earnings growth," said chief executive Paul Reynolds.

Telecom had signed up 165,000 customers to its new XT mobile network by 14 August. As forecasts by analysts, high-value customers appear to be migrating first.

Telecom maintained its guidance for the 2010 financial year, forecasting adjusted Ebitda would be between 1 percent below and 2 percent above 2009.

The company says it is controlling costs tightly, with labour costs down 4 percent and over $100 million in costs removed from the business.

At Telecom's IT services unit Gen-i, earnings before interest, tax and depreciation (EBITDA) decreased 15 percent to $107 million in the fourth quarter compared with the same period last year. Sales for the full year were slightly up, at 1.5 billion compared with $1.49 in 2008.

IT solutions EBITDA in the quarter grew to $13 million from $11 million, but was offset by telecommunication EBITDA declining 18 percent due to a one-off adjustments, Telecom says.

“The quarter saw $446 million in client contracts closed, bringing the total to $1.2 billion for the year to date,” says Chris Quin, Gen-i's CEO. “The mobility campaign has delivered significant results, and we successfully implemented a single integrated service management platform across telco and IT Services. This played a large part in the 49 percent growth in IT services EBIT year on year.”

Telecom's Retail's EBITDA was down 6 percent in the quarter to $180 million when compared to the equivalent quarter.

Network division Chorus's EBITDA was up 2 per cent in the quarter to $140 million compared to the equivalent quarter in 2008.

Telecom Wholesale recorded EBITDA in the quarter down 20 percent to $101 million. Telecom says this reflects pricing changes, increased costs from operational separation and some one-off items.

Long Telecom's trouble child, Australian operation AAPT nothced EBITDA up 10% to A$22 million in the quarter.

“Our focus during the quarter was on on-net sales, ramping up marketing efforts on brand awareness and more profitable offers, and tight cost control,” said Paul Broad, AAPT's CEO.

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