Analysts preview Telecom first-quarter results

UFB issue hanging over Friday's announcement

Analysts are hoping a better retail performance will put sparkle into Telecom's first-quarter results on Guy Fawkes day. But the threat the Government may award some ultrafast broadband (UFB) contracts to electricity lines companies is a bomb sitting under Friday's results. Craigs Investment Partners analyst Geoff Zame expected Telecom's net profit for the three months to September would almost halve to about $84 million, disregarding any movement in its South Cross Cable dividend. He said comparisons with last year, when Telecom's first-quarter result was boosted by a $43m tax credit, would be unfair. Crown Fibre Holdings acknowledged it had missed Sunday's deadline to make recommendations to ministers on who should be awarded the first contracts to build the UFB network, despite saying on Thursday that it was on track to meet that deadline. A spokesman said there had been no unexpected last-minute issues and recommendations would be made shortly. While the market was awaiting word on the UFB scheme, it was tough to put the results centre stage, Mr Zame said. "I am envisaging a little bit of a revenue pick-up because the issues with XT have washed out now, so we should start to see some year-on-year (revenue) growth. Hopefully, perhaps, we will also see some slowing in the rate of decline in calling revenues, because that was pretty drastic through the past financial year." Revenues from phone calls in the year to June fell by almost a fifth to just over $1 billion. Forsyth Barr analyst Guy Hallwright forecast an $87m net profit. That assumed a predicted gain of about $25m on the sale of Telecom's AAPT consumer business to iiNet would be roughly cancelled out by a previously flagged reversal of tax credits that could be booked this quarter. "There has been a slowing trend of revenue loss and I think that will continue – so there may still be a loss, but it will be getting smaller." This will be the first quarter that Telecom will not receive a payment from competitors under the Telecommunications Services Obligation scheme to meet the cost of providing phone lines to uneconomic customers. It will instead be contributing to a $50m annual industry levy to fund the Government's $300 rural broadband investment scheme.

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