Flat quarter for Telecom

Revenue performer Yellow Pages officially up for sale; 'Next Generation Telecom' announced to meet competitive and regulatory challenges

Telecom New Zealand reported an earnings increase for the quarter to September this year of 12.6% compared to the same period last year, bringing in $224 million as opposed to $199 million.

However, excluding $20 million from Telecom's sale of its 90% stake in Samoa Telecom, earnings rose only 2.5% in the September quarter, and EBITDA adjusted for abnormal gains dropped 1.5%.

Operating revenue for the quarter rose to $1.146 million, up 1.7%. Declining revenue for interconnection, data, dial-up internet and IT services offset increases for calling, mobile and directories, Telecom CEO Theresa Gattung says.

Telecom's star performer was its directories business, the Yellow Pages Group, which rose 11.3% to $69 million on the back of new products, higher volumes and higher online revenue. CFO Marko Bogoievski says the Yellow Pages Group is now officially up for sale after Telecom conducted a review into the matter, as reported earlier.

Bogoievski would not confirm who the parties interested in purchasing the Yellow Pages are, but US internet search giant Yahoo is believed to be a suitor. Gattung referred to this as the "worst kept secret in town."

Mobile also performed well for Telecom, bringing in $202 million revenue, up 7.4%. While voice revenues fell slightly, mobile data revenues shot up by a third, to $51 million of the total. Starting in December and in the Auckland region, Telecom will roll out its mobile data network upgrade, EV-DO Rev A, which provides higher substantially higher speeds than its present Rev 0 alternative.

An increased number of broadband customers — a 55.8% jump for residential and 22.4% for business connections — didn't translate into a corresponding rise in revenue: while

up 4.8% to $66 million, Telecom's broadband revenue is still a comparative minnow for the group.

However, residential broadband revenues rose by a third, and now comprise half of the total. Business broadband revenues took a 28.1% hit however and dropped to 23 million, because of Telecom having to lower the pricing to that of its residential service.

Telecom now has 486,000 DSL customers, of which 367,000 are retail customers through its ISP Xtra, or three quarters of the total. While Telecom says wholesale connections increased by 112.5%, the proportion of the total is still only 25%, well below the third target that CEO Gattung promised the government in 2004.

AAPT is still looking like a millstone around Telecom's neck, with an operations loss of A$8 million reported. Operating revenues shrank by 1.7% but EBITDA took a 79.2% king hit in the September quarter.

Nevertheless, Telecom is hoping that deals struck with Telstra and Powertel will help pull AAPT out of the doldrums. The alliance with Powertel gives AAPT access to ADSL2+, the fast second-generation broadband, which it can now offer to business and residential end-customers.

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