Telecom investors appeared frightened off yesterday by the
release of a complicated set of annual accounts, dumping the
stock and forcing the share price down 9% soon after the June
year profit was filed.
The shares closed last night at $2.52, down 23.5c or 8.53%.
There were 32 million shares traded during the day, compared
with 21 million last Friday.
The period under review included five months of trading
before the demerger of Chorus, which became effective on
December 1; and seven months of trading after the demerger.
The result also included a large non-cash accounting
adjustment made in the first half of the financial year which
related to the demerger of Chorus.
Craigs Investment Partners broker Peter McIntyre said the
shares had been "viciously sold off" by investors.
"The outlook was more muted than the market had expected. In
this economy, the market is looking for guidance and if you
don't give it or it is disappointing, investors take the
money off the table.
"It is tricky getting a feel for Telecom. It will take two or
three days going through these numbers to get a clear
understanding of the business."
The dividend was likely to help the share price recover over
the next few weeks, he said.
The adjusted accounts showed Telecom reporting earnings
before interest, tax, depreciation and amortisation of $1.05
billion for the year ended June, up 4.8%.
Net earnings, which were adjusted for continuing and
discontinued earnings, net of tax, came in at $422 million.
A final dividend of 11 cents per share will be paid, with 75%
imputation, taking the total dividend to 20 cps.
Acting chief executive Chris Quin described the result as
"Telecom's operational performance reflects an increasingly
competitive market and is in line with guidance. Following
the creation of a new industry model post-demerger, we expect
strong competition to continue, with increasing
Telecom would focus on winning in key markets to drive
long-term value and compete aggressively in fixed line to
maintain broadband market share, he said.
However, Mr McIntyre said the broadband figures for the June
year were disappointing.
"Telecom said it would aggressively target broadband
customers but that hasn't come to fruition as they added only
2000 subscribers in the second half - lower than market
growth and market share going down to 50%."
Falls in access lines also accelerated but the focus was on
broadband market share, he said.
Performance in the mobile division was flat in terms of
connections and usage revenue. Only handset revenue grew the
Included in the financial outlook, operating earnings for
2013 would be a flat to low single-digit percentage fall, Mr
Quin said, and the company would be investing to hold
broadband market share. Capital expenditure of about $460
million would include spending on spectrum and an allowance
for data centre spending.
Mr McIntyre said the short-term investment associated with
holding broadband market share probably contributed to the
caution on the operating earnings guidance. Craigs viewed the
short-term investment as important to addressing the
longer-term value erosion associated with ongoing market
"The outlook is cautious and remains subject to a strategy
review by the incoming chief executive Simon Moutter." At a
post-profit announcement conference, Mr Moutter said he
expected to add his "flavour" to Telecom's business strategy
early next year after spending his first two weeks in the top
job listening to customers and staff as he started to engage
He was working on an "ambitious strategic plan for the
company" to build on its position in a post-Chorus
environment as more customers switched to better
technologies. As an early initiative, he had pushed making
Telecom compete more aggressively in broadband to prevent
customers leaving "simply on price".