Vodafone NZ's revenue shrinks, but profit rises

Lower mobile termination fees take a chunk out Vodafone's revenue, but telco still increases profit

Vodafone New Zealand’s revenues have shrunk by $73 million to $1.62 billion as lower mobile termination fees mandated by the Commerce Commission took a $116 million bite out of the business.

The revenue drop, for the year to the end of March, was the first in the company’s 14-year history.

But Vodafone still succeeded in upping profits 15 percent to $175 million, thanks to a pay-out of about $30m from Telecom and a $20m drop in depreciation charges.

Telecom refunded about $20 million in contributions Vodafone had paid its rival between 2004 and 2008 as Vodafone’s contribution towards the Telecommunications Service Obligation.

Telecom is also believed to have paid Vodafone about $10 million to settle a dispute over sub-loop unbundling in the wake of Commerce Commission action in 2011 that resulted in Telecom agreeing a $31.6 million settlement with several competitors.

A rise in revenues from Vodafone’s fixed-line business and from mobile data sales helped offset some of the top-line impact of the reduction in mobile termination fees, which finance director James Marsh says knocked $47 million off Vodafone’s annual profit.

Vodafone received a $15 million pay-out from insurers in respect of the Christchurch earthquakes, but Marsh says that did not cover all the damage to its network and it had reinvested more than that in its own rebuild.

That was now complete, except in the Christchurch CBD where it was waiting for the broader rebuild to take place.

Marsh says people would be wrong to assume a link between the 4.3 per cent drop in revenues and Vodafone’s $840m bid to buy TelstraClear, saying the two were not linked.

‘‘The opportunity we see in TelstraClear is to provide a ‘true total’ communications solution, particularly for medium-sized and large enterprises, bringing together two companies with great capabilities as one.’’

The Commerce Commission currently expects to rule on the proposed takeover on October 23. It would drastically change Vodafone’s business, adding a big fixed-line business, 1300 staff and $644 million in annual revenues.

Marsh says it is excited by the opportunity but waiting for word from the commission and the Overseas Investment Office.

Vodafone upped its dividend pay-out to its British parent by $50 million to $180 million. Marsh says this reflects its performance in the previous financial year. He would not comment on the likely impact the merger will have on future dividends.

The company is continuing to invest about $200 million a year in capital expenditure, he says.

- Sunday Star Times

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