Home & Office

No AAPT sale yet: Telecom NZ

Telecom NZ CEO Dr Reynolds told a results media conference in Auckland this morning that "the board has made no decision to sell" AAPT as yet.
Written by Darren Greenwood, Contributor

Telecom NZ CEO Dr Paul Reynolds told a results media conference in Auckland this morning that "the board has made no decision to sell" AAPT as yet.

"There are lots of rumours. We would consider [a sale] if a buyer made an offer that was in the interests of shareholders but we have made no decision to sell," he said.

The comments followed Reuters reporting last night that TPG Telecom was the preferred buyer, trumping three other bids, with a bid of around $400 million.

This morning Telecom New Zealand reported a third-quarter drop in profits of 39 per cent to $97 million in the quarter ended 31 March 2010 compared with the same quarter last year. For the nine months ending 31 March, the profit drop was 17.7 per cent from $413 million to $340 million.

Reynolds said this came as the company fought a challenging economic environment with increased competition and regulatory intervention, which he later said was "more punitive than the UK".

"Telecom is the most regulated telco in the world," he said.

Despite the reports of it being on the sale block, AAPT delivered what Reynolds called a "strong and solid result".

Comparing this third quarter to that of the previous year, earnings before interest, taxes, depreciation and amortisation (EBITDA) was flat on AU$24 million. For the nine months ended 31 March, total AAPT revenue dropped 16.3 per cent from AU$798 million to AU$668 million. However, operating expenses fell from AU$732 million to AU$588 million, so EBITDA rose 21.2 per cent from AU$66 million to AU$88 million.

"They completed their Philippine call-centre program. There's quite a bit of innovation. Google Apps has gone well. There's a focus on getting consumers on contract. We have introduced 24/7 broadband," Reynolds said.

For the fourth quarter, the plan was to target further offshoring to the Philippines, increase the proportion of the consumer base on contracts, keep the billing rationalisation program on track and invest in ADSL2+ and Mid-Band Ethernet coverage.

Reynolds also talked about Analysys Mason's report into Telecom New Zealand's XT outages.

"Analysys Mason did significant work for us on the back of XT outages," Reynolds said. "It's sobering and heartening. There are clear lessons for us and Alcatel-Lucent to fix.

"Some network components and supporting operations were not rapid [enough] to support the massive consumer switch to XT," he said.

There were software issues that contributed to network stability. The initial network configuration also caused some coverage variability. Some aspects of the network architecture was over complex and there were immature operational management systems. Some of the security standards were also set too high.

"We have taken an 18-month forward view on capacity management to get that right. We have completed a common software upgrade across the network. We have seen how we can remove the complexity that Analysys Mason recognised," he said.

This has meant the XT network has doubled its number of Remote Network Controllers from two to four, and will have eight by June 2011. There will be extra new cellsites.

Reynolds said the report did not blame anyone, but added that vendor Alcatel-Lucent was still on notice.

Editorial standards