Telecom Corp of New Zealand (ADR) (NZT)

With frequently into the news, the company is generating a mixed feeling for any investor. It recently completed the sale of Yellow Pages Group, with net proceeds of $2.16b received in April 2007. Also it is considering of submitting its own demerger plan to government focusing on the need to create more sustainable future-proofed regime. It plans to structurally separating its fixed line bottleneck network into a separately owned company, a simpler form of operational separation for remainder of the business, resulting in faster delivery of regulated wholesale broadband services.





For nine months ended March 2007, company’s revenues increased by 1% supported by increase in mobile revenue, higher broadband & internet income and increased other operating revenues. Net income from continuous operations turned positive which was benefited from lower inter carrier costs, decreased depreciation & amortization expenses. Reporting another strong quarter from mobile segment it added 65,000 net connections and strong mobile data revenue growth. In terms of broadband connections it added 46,000 net of mobile and DSL connections taking the total subscribers to 609,000 which is traditionally a lighter quarter.





The Supplier of telecommunications and information technology services in New Zealand and Australia recently signed a WorldMode roaming agreement with Hong Kong based Telco CSL for over 180 countries, which will enable it to widen its reach. Also it is planning to start the service of one number, one mailbox, and one bill solution later this year. It recently launched services like mobile number portability which will enable it to chase competitors customers and Yahoo!Xtra open portal which will provide value added services.





Contrary to the optimistic picture, the New Zealand operation’s EBITDA for FY-2007, is expected to decline by around 3%. While no specifics were given, it is believed, the key drivers could be lower mobile revenue growth and higher mobile cost of sales. The future guidance, the government requirements of separation of business which will impact the business and also the recent revenue growth which is neither lucrative today nor it may be tomorrow considering the high penetration levels in New Zealand, the company seems dicey.