Telecom NZ cuts profit forecast for next three years

Nicole McCormick
16 Apr 2010

Telecom New Zealand has cut its profit guidance over the next three years, blaming the government’s broadband subsidy program and lower sales.

The operator yesterday trimmed its ebitda forecasts for FY11 (ending June) from NZ$1.82-$1.86 billion ($1.29b-1.32b) to NZ$1.72-1.78 billion, it announced.

While the firm previously assumed ebitda increases of NZ$70-$110 million and NZ$75-$115 million in FY12 and FY13, it slashed this to just NZ$20-$80 million for both years.

Telecom NZ attributed the lower ebitda to the government’s new rural broadband fund, which will be funded mainly by the carrier and the government.

Softer revenues are also expected to due lower mobile growth, price pressures in voice and data markets and the economic downturn, it said.

Weaker sales means it will need to “drive harder on cost out programs,” with 200 management jobs reportedly to be cut by the end of June.

The new financial guidance assumes that it will continue Australian operator AAPT and “does not reflect any impact from the government’s Ultra Fast Broadband initiative, which is likely to reshape the industry.”

However, the Australian Financial Review reports that Telecom NZ is discussing the sale of AAPT with private equity buyers.

“With execution heavily dependent on cost out initiatives and XT mobile growth, the market is likely to retain a relatively cautious stance toward management guidance until it sees evidence of its execution,” remarks Credit Suisse.

The XT Mobile network has failed several times this year, affecting some 200,000 customers.

But chief executive Paul Reynolds said the outages had not adversely affected net additions in the March quarter.

Shares fell 2.7% yesterday.

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