Telecom earnings tipped to fall

Telecom New Zealand's third-quarter earnings are expected to have fallen by as much as 21% in the three months to March.
The country's largest listed company will release its results in Australia tomorrow, with Forsyth Barr forecasting reported profit from continuing operations to be down 21% to $154 million for the quarter.

New Zealand revenue was likely to fall by 2.4% in the quarter with strong year-onyear growth in broadband, Internet and IT services being offset by falls in local service calling, mobile, interconnect and legacy data revenue, Forsyth Barr broker Ken Lister said.

Australian revenue was due to growth including Powertel revenue and a more favourable foreign exchange comparison with the previous corresponding period than the first six months of the financial year.

Interest costs would be down, due to lower debt after last year's $2.2 billion Yellow Pages sale and subsequent $1.1 billion return of capital.

However, there were still several key issues to the result, he said.
Separation of Telecom formally occurred on March 31 but full implementation would not be in place until June 30.

Unbundled local loop services were due to be available in the first 15 exchanges by April 30 and Mr Lister was expecting an update tomorrow on progress.

‘‘We continue to believe that the impact of competitors' . . . local loop unbundling roll-outs will ultimately be less than the market expects, although this will take time to become apparent,'' he said.

The local loop is the copper wires that link homes to their neighbourhood exchanges.
Telecom competitor Orcon announced yesterday it was increasing its unbundled highspeed

Internet and telephone service to Auckland customers by the end of May.
Telephone and broadband customers in parts of Auckland would no longer have to deal with Telecom, Orcon chief executive Scott Bartlett said.

- Ken Lister's disclosure document is available on request from Forsyth Barr.