Profit dips for cost-cutting Telecom

Summary:New Zealand telco Telecom, which has slashed its workforce by more than 1,000 to cut costs, has reported a small decline in adjusted annual earnings.

Telecom NZ's adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) for 2013 slipped to NZ$1.04 billion in the 12 months ended June 30, from NZ$1.05 billion a year earlier, it said.

Telecom gave guidance of NZ$1.04 billion to NZ$1.06 billion in May, saying it was facing intense rivalry on fixed-line services and a margin squeeze in the Gen-i corporate services segment.

Revenue fell 8.5 percent to NZ$4.19 billion.

The board declared a final dividend of NZ$0.08 per share, taking the annual return to NZ$0.16 per share.

Statutory profit plunged to NZ$236 million from NZ$1.16 billion from a year earlier, when it still recognised earnings from Chorus, the network operator unit that was carved out at the end of 2011.

Telecom had NZ$127 million in restructuring costs and asset impairment charges, the top end of its forecast of NZ$100 million to NZ$130 million.

Telecom is going through a radical overhaul of its business into a data-driven and mobile-focused telecommunications operator, stripping out costs.

The company cut its workforce by 16 percent this year to 6,622.

"We are realistic about the performance improvements that must be achieved," chief executive Simon Moutter said.

"We will target a leading position in the mobile market, ensuring we are competitive on costs, and improving the relevance of our marketing efforts, especially in key segments such as young, urban customers."

The company's retail unit reported a 1.4 percent fall in EBITDA to NZ$718 million and a 5.2 percent slide in sales to NZ$1.83 billion as price competition ate into its margins in both mobile and broadband services.

Telecom's mobile customers dropped 11 percent to 1.82 million after the closure of its obsolete CDMA network, retail access lines rose 4.4 percent to 976,000, and broadband connections climbed 5.2 percent to 630,000.

Gen-i reported a 4.9 percent fall in earnings to NZ$370 million and a 5.5 percent decline in revenue to NZ$1.26 billion as customers consolidated their lines and moved to internet protocol-based services. The corporate services sector also faced heightened price competition.

The Australian AAPT unit reported a 16 percent drop in earnings to NZ$74 million on a 22 percent slump in sales to NZ$515 million, with the decline heightened by a stronger Kiwi dollar. The unit, which had its consumer division sold in 2010, lost customers amid market consolidation in the Australian government's National Broadband Network rollout.

Topics: New Zealand, Telcos

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