Telecom New Zealand has posted a significant 56.8 per cent drop in net profits to $NZ164 million ($AU130.86 million) for the year ending 30 June 2011.
Adjusted full year earnings were up 1.6 per cent to $NZ388 million ($AU309.61 million), as the telco works to split its Chorus unit after the company secured a piece of the $NZ1.5 billion Ultra Fast Broadband (UFB) initiative, New Zealand’s equivalent to Australia’s National Broadband Network (NBN).
The telco was chosen along with Christchurch City Holdings’ (CCH) fibre business, Enable Networks, in May following months of negotiations with Crown Fibre Holdings, the company set up to conduct the wholesale-only fibre network rollout.
The company posted full-year adjusted revenue for the 12 months to June 30, of $NZ5.1 billion ($AU4.07 billion), a drop of 3.2 per cent, while adjusted expenses fell 5.8 per cent to $NZ3.3 billion ($A2.63 billion).
Telecom highlighted a 2.1 per cent rise in adjusted earnings before interest, taxation, depreciation and amortisation to $NZ1.8 billion ($A1.44 billion), which was above previous guidance.
“At the start of 2011, Telecom updated its strategy to reflect New Zealand’s challenging and competitive environment, create a leaner and more effective model, prepare for a fibre future, and ensure an intense focus on FCF through management of capital and operating costs,” Telecom NZ chief executive, Paul Reynolds, said in a statement to the ASX.
According to Reynolds, the change in industry infrastructure resulting from the UFB has resulted in a number of copper-based assets being deemed irrelevant moving forward.
“This will be the third industry structure for telecommunications in New Zealand in five years, and this series of rapid changes has created significant compliance and participation costs.”
In order to bid for the UFB contracts, Telecom NZ was agreed to structurally separate its Chorus retail division from the rest of the company, however, the separation has taken longer than originally planned.
“The work to demerge Chorus by the end of the calendar year continues apace, with more information to be made available to shareholders shortly,” he said.
The telco also lost 95,000 mobile subscribers, the majority of which it attributed to “low-value pre-paid CDMA (Code Division Multiple Access) customers.
“This trend has had minimal impact on revenues and is likely to continue as we move closer to the close down of the old CDMA network ... by July 2012.”
A fully imputed fourth quarter dividend of 7.5c per share is to be paid, along with an additional fully imputed special dividend of a further 2cps, bringing the total for the year to 20cps.
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