Telecom NZ earnings halve

Telecom New Zealand has reported a nearly 50% slump in September quarter profit, as revenue in key segments and government subsidies shrank.
Net earnings fell 49.1% to NZ$83 million ($66m), Telecom NZ said
The bottom line was hit by NZ$16 million worth of regulatory costs, accrued from the removal of its annual Telecommunications Service Obligations (TSO) subsidy for providing services to unprofitable areas, funded via levy through Telecom's competitors.
The TSO has been replaced by the Telecommunications Development Levy (TDL). While the TDL will also be sourced from rival operators, the fund is expected to average NZ$50 million annually, compared to the NZ$70 million TSO.
Telecom's profits were also impacted by NZ$3 million in costs from the Christchurch earthquakes in September, which caused damage to equipment and disrupted services.
Revenue fell 2.9% to NZ$1.32 billion, while ebitda dipped 0.9% to NZ$443 million. Telecom CEO Paul Reynolds said the operator was, like many traditional fixed-line operators, feeling the pressures of the shrinking home phone market.
“Growth in services such as mobile, broadband and ICT is only partially offsetting declines in traditional fixed line and voice services,” he said. “However, the rate of fixed access line loss and fixed to mobile substitution remains somewhat less in New Zealand than many overseas countries.”
Local service revenue fell to NZ$251 million from NZ$261 million in 1Q10.
The XT Mobile network, which launched in May last year, added around 127,000 customers. At the end of the quarter, the HSPA+ enabled UMTS network had around 839,000 customers, or 40% of Telecom's retail mobile customer base.
But overall mobile subscribers fell by 0.9% to 2.1 million, with the lion's share of the losses being wholesale MVNO connections.
The higher revenue contribution from XT users helped mobile ARPU grow to NZ$26.83 in the quarter, from NZ$26.30 a year ago.
Broadband revenue grew 5.6% to NZ$75 million, with Telecom's retail broadband customer base growing 6.6% to 581,000.
Telecom booked gains of NZ$20 million from the sale of Australian subsidiary AAPT's consumer division to iiNet for A$60 million ($60.9m) announced in July.

Largely as a result of this sale, Telecom raised its guidance for FY11 by NZ$30 million. The company now expects profit of between NZ$340 million and NZ$370 million, but this would still be a decline on its NZ$382 million profit from FY10.