Telecom claims success in halting declining results

Full year results show EBIDTA decline of just 0.2 per cent, but 200 staff were cut in the last quarter

Telecom NZ (ASX:TEL) has claimed success in halting the decline in its revenues, posting a drop in EBITDA of 0.2 per cent for the full financial year to 30 June.

In its reports to the ASX, Telecom highlighted its first year of growth in free cash flow since it was hit by what it termed “regulatory shock” in 2006.

However, the company said it had started cutting jobs to the tune of 200 during the last quarter of the financial year and posted a decline in net earnings of 4.5 per cent year on year to $382 million.

Operating revenue also declined by 6.5 per cent year on year to $5.27 billion but Telecom noted it had slashed costs by up to $249 million.

In a statement, Telecom CEO, Paul Reynolds, said the company had achieved “notable improvements in the trajectory of each of its businesses”.

“Chores, Gen-I and AAPT have each delivered EBITDA growth for the year, and the turnaround in the Retail business is on track for FY11,” he said. “The XT mobile network continued to grow strongly during Q4, with 712,000 customer connections at 30 June 2010, up 20% on the previous quarter. Total Gen-I mobile revenues were up 12% and Retail mobile broadband revenues were up 98% on Q4 FY09.”

Earlier in August, Telecom made good on its plans to become a player in New Zealand’s Ultra-Fast Broadband network submitting a “refined proposal” to the New Zealand Government on how it would help deliver the proposed fibre to the home network.

The proposal is predicated on the structural separation of Telecom through a demerger into two companies which would create a new stand alone company, Chorus2. The bid outlines Telecom’s plan to make fibre to the home available to 75 per cent of New Zealanders by 2019.

Back in May the company said it was “fully investigating” structural separation in order to align the interests of its equity and debt holders with those of the Government and people of New Zealand in order to be involved in the Ultra-Fast Broadband build-out.

The company also recently sold its stake in Macquarie Telecom for $9.9 million, and its AAPT assets to Internet Service Provider, iiNet (ASX:IIN) for $60 million, after much speculation.

In April, Telecom revised its financial guidance for the financial year 2011 through 2013 to reflect the impact of several regulatory and market factors.

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