Telecom quarter profit drops 23.8%

Telecom's share price was up one cent in early trading after the company reported a solid second-quarter net profit of $80m.

The profit, though down 23.8 per cent on the same quarter in 2008, was slightly higher than analysts' expectations - boosted by a $9m dividend from Telecom's investment in the Southern Cross cable. Revenue of $1.3 billion was 6.5 percent down on the same period last year, but expenses were also down 10 percent to $890m. Telecom said its retail arm had upped its share of the broadband market, lost fewer phone customers and cut costs. Earnings before interest, tax, depreciation and amortisation were $425m, at the high end of analysts' estimates, and up 1.7 per cent on the same quarter in 2008. However, the company wrote $251m off the value off its investment in Australian mobile carrier Hutchison and TMT Ventures. It accounted for that directly in its equity reserves, meaning the write-off was not recorded in its quarterly profit figure. Telecom also warned that its profit for the full year would come in at the "lower end" of its previous guidance of $400m-$440m and it faced long-term risks from the Government's $1.5b Ultrafast Broadband scheme. Telecom won 64 per cent of new broadband customers during the quarter. There are now more than a million broadband customers in New Zealand, with Telecom Retail accounting for 57 per cent of the market. XT delivered "solid growth´with 467,000 connections at the end of December. Chief executive Paul Reynolds confirmed Telecom was pushing an "alternative model" in its bid to partner with the Government in its bid to roll out ultrafast broadband to three-quarters of the country, which would see fibre-optic cable extended from its roadside cabinet network. He said that would reduce "waste and duplication".