Strong competition was leading to lower prices and the loss of customers. Telecom had lowered prices to stop losing customers but the reduction in price for bundled phone access and broadband was now about $75 a month, down from about $100 a couple of years ago, he said.
This reduction of $25 a month across 600,000 broadband lines would cost Telecom approximately $180 million per year in revenue.
''With Vodafone now offering free calling in its $75 bundle, this could further impact [on] Telecom's already declining $250 million of calling revenues. To put this in context, the consensus earnings for Telecom in 2013 is $322 million.''
The good news for Telecom is it had the opportunity to offset falling revenue by lowering costs through a reduced head count, decreased capital expenditure and simplification following the demerger from Chorus, Mr Windust said.
In March, Telecom announced a reduction in staff numbers of up to 1200 people resulting in a reduction in payroll costs of about $100 million. The market would be wondering if there were further measures the company could take to reduce costs, but also to generate some revenue growth.
One area of growth that Telecom might target was increasing IT services revenue through data centres and the use of cloud computing, he said. Consensus earnings data from market analysts was forecasting Telecom to maintain and marginally grow earnings over the next three years.
However, most analysts acknowledged it would be hard work and put ''underperform'' recommendations on the company.
''The good news for investors and those seeking income is that if Telecom can maintain earnings, it will be able to continue to pay a healthy dividend yield,'' Mr Windust said.
