Telecom cost-cutting on the table
Telecom's annual results announcement on Friday is expected to be a subdued affair, though there will be more information on its cost-cutting initiatives.
Chief executive Simon Moutter popped a bubble that had been building in Telecom's share price in May, when he warned job cuts would do no more than offset declining revenues from its legacy products, such as landline calling.
That sent Telecom shares down about 15 per cent, and since then they have been trading in a narrow range around $2.30.
Forsyth Barr analyst Blair Galpin said it was forecasting a 6.3 per cent drop in annual revenues to $4.25 billion and an 82.3 per cent fall in net profit to $205 million.
However, it expected only a 0.4 decrease in earnings before interest, tax, depreciation and amortisation, for "underlying net profit" to be up about 16.4 per cent at $325m.
The broker expected Telecom to give only broad financial guidance, if any, for the year ahead.
Deutsche Bank analyst Arie Dekker was picking revenues would come in at just under $4.2b and a profit before abnormals of $330m.
Moutter told BusinessDay earlier this month that he would tell investors how many staff had left the company at the briefing. He announced in February that it would cull between 930 and 1230 jobs, and said the final figure would be within that range.
"We will update the market on the specific outcomes of that process. In May, we said we were moving from a focus on labour costs to a wider cost-reduction process, with the central purpose of getting our cost structure at or lower than our competition."
Telecom might give some steer on the "size of the prize" on Friday but that could still be pretty vague given the complexities, he said.
Galpin said analysts would be looking for information on how far the cost-cutting had extended beyond headcount reduction, and what room there might be to reduce supplier expenses, for example.
Although it would be early days, he also hoped Telecom would say how many broadband customers it had converted to super-fast copper broadband technology VDSL. The telco is expected to say how many customers it has signed up to ultrafast broadband.
"There is a bit of an opportunity to win back customers if they have got VDSL working well, and given they are ahead of Vodafone in launching consumer UFB plans. We are looking for improved connection statistics from [July] onwards," Galpin said.
He expected only a "small improvement" in its share of the mobile market.
Dekker agreed mobile would be a focus and said there would also be some interest in the dividend. A change in dividend policy was unlikely "but these are the times when they may update their view on that".
The annual result would be an opportunity to step back and digest the impact of Telecom's decision to sharpen its consumer-broadband plans a year ago, he said.
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