Telecom discusses demerger process at briefing

Acknowledges loss of 98,000 prepaid mobile customers

Telecom says it is on track to proceed with the demerger of Chorus by the end of the calendar year, but still has several large hurdles ahead, including a shareholder vote to approve the scheme.

Chief executive Paul Reynolds told an analyst’s briefing that Telecom’s board was taking responsibility for shareholders and would present them with “a lot of detail” on the scheme, so that shareholders can vote on it accordingly.

“Alongside of that of course, as you would find with any deal of this nature, the board has commissioned independent experts to review the deal in detail and ultimately we will share independent experts’ report with shareholders, so that they can take that into account,” Reynolds says.

The company will also have to consult with the industry on Chorus’s standard offers for UFB products and services.

Telecom reported a loss in net earnings of $166 million, but a overall EBITA of $1.8 billion (see Telecom earnings down 56.5 percent).

In the presentation, Reynolds announced that Chorus increased its EBITA to $806 million, a rise of 5.1 percent compared to the 2010 financial year.

Meanwhile, that company’s mobile sector showed a small growth in the number of postpaid customers, with an extra 3000 plan-based connections, but lost 98,000 prepaid customers. Reynolds says the loss of these customers had a “low revenue impact”.

Mobile revenue was up 5 percent due to existing customers spending more on average, driven by an increase in mobile data sales and usage with 30 percent of all customers having smartphones. Exclusive handsets from companies like HTC and Motorola had helped Telecom’s smartphone sales, Reynolds says.

“The Android strategy becomes the smartphone strategy.”

Reynolds also addressed concerns that the company’s failed ‘abstain for the game’ campaign had hurt its brand.

“We feel like the best man at the wedding,” he said. “You know, we just told a slightly risqué joke that was hilarious last night but the bride’s relatives didn’t like it one bit.”

Reynolds said the marketing campaign had not done any significant damage, because customers were more concerned about value, service and reliability.

“We have had three days where that’s been awkward, no question, and we have just said ‘Stop this, move on’.”

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