Vocus reports rise in New Zealand business

Following its decision not to sell the New Zealand segment of its business, Vocus has reported a rise in NZ revenue to AU$335 million, with total group revenue of AU$1.9 billion for FY18.
Written by Corinne Reichert, Contributor

Vocus' decision in April to cease all discussions with potential buyers of its New Zealand business has been vindicated, with the telecommunications company reporting the entire segment lifting during the 2018 financial year.

According to Vocus' FY18 full-year report, published on Thursday, its New Zealand segment brought in revenue of AU$335 million, up 4 percent -- AU$162 million from enterprise and wholesale NZ, and AU$172.9 million from consumer NZ.

As of June 30, Vocus had 72,000 Ultra-Fast Broadband (UFB) customers and 122,000 consumer copper broadband customers at a combined average revenue per user (ARPU) of NZ$70.05 per month and a 13 percent UFB market share.

Across New Zealand, Vocus also had 24,000 mobile customers, 17,000 energy customers, and 22,000 SMB customers.

Overall for the financial year, Vocus reported total group revenue up 2 percent to AU$1.9 billion.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) were stagnant, at AU$366 million, while statutory EBITDA was AU$360 million, up 7 percent. Underlying net profit was AU$127 million, down 17 percent; while statutory net profit was AU$61 million.

During the year, Vocus spent AU$166 million on capex, in comparison to the AU$189.6 million spent last financial year.

As of June 30, net debt was AU$1.001 billion, down from last year's AU$1.029 billion, after upping its debt facility to AU$1.3 billion in June.

These results were in line with its refreshed guidance issued in February, which said it expected FY18 underlying EBITDA of between AU$365 million and AU$380 million; underlying net profit of AU$125 million to AU$135 million; capex of between AU$180 million and AU$190 million; revenue of between AU$1.9 billion and AU$2 billion; and net debt between AU$1.03 billion and AU$1.06 billion.

Vocus' Enterprise, Government, and Wholesale division grew by 11 percent to AU$568.9 million -- AU$419.8 million from data networks, AU$79.8 million from voice, and AU$46 million from datacentre -- thanks to its fibre and Ethernet products; while Consumer Australia remained stagnant, at AU$790 million, in what Vocus called a "competitive market".

In Consumer Australia, Vocus made AU$393.6 million from broadband, AU$70 million from voice only, AU$56.3 million from mobile, and AU$235.6 million from energy. Its consumer broadband and bundles customers numbered 222,000 by June 30 at an ARPU of AU$58.85; its National Broadband Network (NBN) customers numbered 298,000 at an ARPU of AU$63.69; its consumer mobile customers numbered 155,000; and its consumer energy customers reached 140,000.

However, its Commander SMB brand "suffered due to a lack of focus", and was down 15 percent to AU$203.9 million: AU$36 million from data networks and AU$138.7 million from voice.

Vocus is aiming to double its revenue across its infrastructure businesses in the next five years, new CEO Kevin Russell said.

"Vocus' primary focus going forward is growth. Our market share is low relative to our fibre and network infrastructure assets," he said.

"Our priority is to leverage these assets to maximise profitable growth within our core Australian and New Zealand infrastructure-focused businesses."

Vocus also provided an update on its Australia-Singapore Cable (ASC), which finished being laid in July, saying 2.5Tbps of capacity has thus far been sold on the subsea cable system to date, including "a major global OTT customer".

"Sales activity is expected to gain further momentum once the system is live in a few weeks and the demand for traffic via Southeast Asia is unlocked," Vocus added.

"ASC will also drive revenue opportunities for our domestic fibre assets as we enter into deep partnerships with key international players."

Vocus additionally pointed to the AU$137 million contract it was awarded in June by the Australian government to construct the Coral Sea Cable between Australia, Papua New Guinea, and the Solomon Islands, calling it a "significant win".

"We have also made significant progress in this last year towards the implementation of a single advanced core network," Vocus added.

"This, together with the ongoing consolidation and decommissioning of legacy assets, the capacity upgrades to our network and the improved capital expenditure disciplines and controls we have implemented, will all deliver ongoing benefits into the future."

Vocus merged with M2 back in February 2016 to form the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia, worth more than AU$3 billion.

The company announced in January that it would be splitting its wholesale and enterprise arms as part of accelerated transformation program. It will soon have four operating segments: Enterprise and Government; Wholesale and International; Consumer; and New Zealand.

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