Revenue drop and $19 million loss ends TelstraClear’s 2006

Half-year revenue drops by 4%

Telstra’s New Zealand arm TelstraClear continues to perform poorly, much to the dismay of its Australian shareholder. In the six months to 31 December 2006, TelstraClear’s revenue dropped by $14 million to $335 million. In New Zealand currency the result represents a 4% decline from the same period in 2005. However, for owner Telstra Australia, exposed to exchange rate changes, it represented a 10.9% drop in income for its struggling subsidiary. Earnings before interest and tax (EBIT) went into the red with a $19 million loss locally for the end of last year; 18.8% up on the previous year. TelstraClear’s earnings before interest, taxes, depreciation and amortisation (EBITDA) however suffered slightly less, with a 10.7% drop to $50 million from $56 million in 2005; the EBITDA margin declined somewhat to 14.9%. Feeling the pressure of competition, TelstraClear experienced “significant declines” in calling revenues for all customer segments. Internet revenues also dropped as cheaper pricing plans were rolled out for TelstraClear’s business customers. Furthermore, mobile revenues also fell as business customers shifted away from TelstraClear. Capital expenditure for TelstraClear increased by $11 million in the half-year to 31 December 2006 compared with 2005 ahead of the government’s new telecommunications regulation and the provider’s wireless network build in Tauranga but total expenses including depreciation and amortisation dropped by the same amount. Wholesale data and “increased gateway revenues” offset the slide in earnings, according to TelstraClear, but Telstra does not provide detailed figures on these items. TelstraClear spokesman Mathew Bolland declined to elaborate on the results. In his email to staff before Christmas, TelstraClear predicted the telco was “on a trajectory to disaster” and facing a $7 million loss instead of the anticipated $14.8 million profit. Freeth also said in his message that TelstraClear was “behind plan” for revenue by $67 million in December 2006.

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Tags telstraclear Telstra results loss Allan freeth

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