Telecom reports slightly reduced profit for half-year

Revenue decline is offset by expense reduction

Telecom has announced a profit of $868 million for the July-December 2010 half-year, a 0.5 percent reduction on the previous year's figure.

Revenue was down 3.3 percent to $2.53 billion, but this was offset by a 4.7 percent reduction in expenses, achieved by "lower mobile cost of sales and ongoing efficiency improvements", according to a statement from Telecom announcing the results.

In the statement, Telecom CEO Paul Reynolds says: "A continued strong focus on operational excellence and cost control has helped to offset increased tax and ongoing regulatory impacts. We remain on track to deliver our full year earnings guidance and indeed we have improved the Group capex outlook; we now expect full year capex to be within the $950m - $1.0bn range for the financial year, down from the $1.0bn to $1.1bn indicated previously.

“Telecom’s strategy has been updated to drive better product, platform and process outcomes for customers, create a leaner operating model, and an intense focus on free cash flow through management of capital and operating costs. Telecom people have been set revised targets and accountabilities to meet these goals.

“As a result, we are on track to deliver our goal of $155m of cost-out in FY11."

Chorus reported increased EBITDA of $391 million for half-year, up $6 million on the equivalent period last year, while Wholesale and International reported EBITDA of $46 million, a 57.8 percent decrease.

“While Wholesale external EBITDA was up 9 percent on the previous equivalent period, fully-traded EBITDA was down due to internal cost allocations, a changing product mix and broadband repricing,” says Nick Clarke, acting CEO of Telecom Wholesale.

Telecom Retail reported EBITDA of $240 million for the half-year, up 36 percent on the on the equivalent period last year.

Telecom Retail CEO Alan Gourdie said the solid increase in EBITDA reflects lower mobile cost of sales, a focus on removing cost from the business and improved broadband pricing from Wholesale.

Gen-i reported EBITDA of $105m for the period, a 6.1 percent increase over the first half of FY10.

According to the statement, "EBITDA growth was driven by IT services growth, decreasing overhead costs and decreasing internal costs, which are falling in line with external telco revenues."

Telecom's Australian subsidiary AAPT reported adjusted EBITDA of A$38 million for the first half of FY11.

EBITDA was affected by Telstra’s renegotiated wholesale terms which reflect reduced volumes and the sale of the Consumer business, partially offset by lower operating expenses.

“We have successfully divested the Consumer business from AAPT and completed the sale process, and the Wholesale and Business divisions continue their strong sales performance,” says AAPT CEO Paul Broad.

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