Telecom N.Z. posts first loss


Telecom New Zealand Chief Executive Theresa Gattung said the AAPT writedown was not unexpected

SYDNEY, Australia (CNN) -- New Zealand's largest listed company, Telecom Corp., reported its first annual net loss but calmed the market by keeping a tight rein on costs.

Telecom New Zealand (TNZ) posted a net loss of NZ$188 million ($85 million) Friday, after making an NZ$850 million ($386 million)writedown on its Australian investment AAPT.

Excluding the AAPT writedown, the company performed better than expected, with a pre-abnormal net profit of NZ$670 million, up 9.1 percent on last year's result of NZ$614 million.

TNZ Chairman Roderick Deane defended the writedown.

"This is a responsible and prudent book value adjustment," he said.

"Many telcos have had to adjust values in the last couple of years. This is a moderate step compared to most."

Deane said the writedown would not impact on TNZ's financial position and ability to access debt markets.

The result was welcomed cautiously by analysts.

"Pre abnormal losses, the result was slightly better than expected," Patrick Russell, telecoms analyst at Merrill Lynch, told CNN.

"In an environment where revenue growth is benign they are successfully focusing on cost and capex reduction."

Overall operating revenues grew by 2.5 percent while operating expenses were reduced by 1.8 percent

Earnings before interest, tax, depreciation and amortization (EBITDA) and a dividend for TNZ's share in the Southern Cross cable, were $2.265 billion, up 9.4 percent on the previous financial year.

TNZ received a $245 million dividend from its share in the cable which links Australia, Fiji, New Zealand and the U.S.

TNZ Chief Executive Theresa Gattung said the returns from TNZ's Australian business continue to improve but she did not expect to see revenue growth in Australian in the next period.

"The writedown was not unexpected given the changed telecommunications environment," she told CNN.

"We moved quickly to realign the Australian business model to turn cashflow positive earlier than we thought."

TNZ shares rose 2.25 percent to NZ$4.98 Friday on news of the results.