XT outage may affect Telecom earnings

WILMA McCORKINDALE 624208548

TELECOM-PENSATION: Telecom chief executive Paul Reynolds (left) with Telecom retail chief executive Alan Gourdie in Dunedin when the compensation package was announced.

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Telecom is expected to post a quarterly profit of between $60 million and $90 million on Friday when it reports its results for the three months to the end of December.

That assumes there are no unexpected writeoffs, or dividends from the Southern Cross cable.

Analysts are making different assumptions about Telecom's tax bill and interest charges. But there is consensus about Telecom's group earnings before interest, tax, depreciation and amortisation (ebitda), which are expected to come in at about $395m.

Craigs Investment Partners analyst Geoff Zame said the Government's $1.5 billion ultrafast broadband (UFB) initiative would overshadow the result. An invitation for private sector partners to bid to build fibre-optic networks in 33 cities closed at the end of January.

Analysts would be interested in more clarity on Telecom's approach to the initiative, he said, but that would only be forthcoming if Telecom felt providing details would be to its advantage.

The financial performance of mobile network XT would also be in the spotlight, he said.

"Those two things will dominate sentiment."

Forsyth Barr analyst Guy Hallwright forecast an $85m profit. "I think XT will probably have had a reasonable quarter", though its recent outages could affect future growth. The mood might be subdued following those outages. Analysts would be looking for a progress report on what was being done to manage the issue.

Mr Hallwright did not expect executives would spell out in more detail the company's response to the UFB scheme. "I don't see how they could. They have just put in their bid, others have put in their bids, they are not public – there is nothing much they could say, I'd have thought."

- © Fairfax NZ News