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[LOGO OF TELECOM]
NEW ZEALAND
14 November 2000
MEDIA RELEASE
(Embargoed until 9am)
FIRST QUARTER EARNINGS REFLECT
TRANSFORMATION INITIATIVES
Telecom recorded net earnings of NZ$161 million for the three months ended 30
September 2000, including the contribution of subsidiary company AAPT in
Australia.
Telecom increased total revenues for the quarter to NZ$1,291 million, after AAPT
achieved 42% growth in revenue from the same period in 1999 and the group's
businesses excluding AAPT achieved revenue growth of 4.8%.
Chief Executive Theresa Gattung said today the quarterly results reflected
Telecom's ongoing transformation into an Australasian online and communications
group.
"Revenue growth on both sides of the Tasman was a very pleasing reflection of
our market initiatives, including AAPT's success in winning major corporate and
government contracts," Ms Gattung said. "We continue to make good progress
although moves to position the group for future growth pushed up costs in some
areas with a resulting impact on net earnings for the quarter."
Net earnings of NZ$161 million included funding costs arising from Telecom's
investment in AAPT and amortisation of goodwill on that investment, along with
consolidation of AAPT's operating results for the quarter. The Telecom result
was not directly comparable with net earnings of NZ$209 million recorded for the
three months ended 30 September 1999, prior to AAPT becoming a subsidiary.
Ms Gattung said Telecom was pleased with the latest quarter's performance of
AAPT which raised earnings before interest and tax (EBIT) by 328% to A$5.3
million. Despite this, AAPT was impacted at the bottom line by start-up costs in
its Internet joint venture with America Online.
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Telecom will pay a fully-imputed dividend of NZ5.0 cents per share for the first
quarter of the 2000-01 year, in line with the dividend policy change announced
by the Company in August. Shareholders who opt to receive shares in lieu of cash
dividends will be offered those shares at a discount of 3% to the price
calculated under the Telecom Dividend Reinvestment Plan.
Revenue growth in the group's businesses excluding AAPT reflected a 6.9%
increase in Calling revenues (national and international) and an 18.4% increase
in Data revenues. Local Service and Mobile were marginally down from the same
quarter last year with the impact of price reductions more than offsetting
growth in customers and call volumes.
"Telecom continues to drive growth in Data services, especially on our IP
network where revenues jumped 34.8%," Ms Gattung said. "The roll-out of ADSL
technology is proceeding very well and our broadband Jetstream service is being
picked up by around 80 more customers everyday."
The XTRA Internet service also saw further rapid growth, with registered
customers growing 26,000 during the three months ended 30 September 2000 - the
highest quarterly growth rate since mid 1999.
Cellular connections reached 1,031,000, up by 35.5% from 30 September 1999.
Telecom's market share stabilised during the latest quarter and growth resumed
in the number of customers with post-paid connections.
"Telecom is driving the Mobile business forward with new price plans and new
services like text messaging, and with the CDMA network roll-out which remains
on track for launch by mid 2001," Ms Gattung said.
Cost of sales, driven largely by Mobile marketing initiatives and by
international out-payments to other carriers, were a major contributor to an
11.9% increase in total costs in Telecom's businesses excluding AAPT.
"The increase is also reflected progress being made in other strong growth
businesses like XTRA and esolutions, and to a lesser extent, to costs in our
traditional core businesses," Ms Gattung said. "Cost reduction is a major focus
for Telecom going forward."
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Ms Gattung said Telecom expected to formally complete the 100% takeover of AAPT
in December, with compulsory acquisition of the 0.8% of shares still
outstanding.
Growth in AAPT's revenue was driven by substantial revenue gains in the
company's principal areas of business, including Voice calling and Data and e-
commerce services. The quarter saw AAPT continue to develop new corporate and
government contracts.
Overview of Results
Quarter ended Sept 2000 Quarter ended Sept 1999
Net earnings NZ$161 million NZ$209 million
Net earnings excl. AAPT NZ$200 million NZ$212 million
Operating revenues NZ$1291 million NZ$887 million
Operating revenues NZ$930 million NZ$887 million
excl. AAPT
Expenses NZ$948 million NZ$522 million
Expenses excl AAPT NZ$584 million NZ$522 million
1st quarter dividend 5.0 cents 11.5 cents
For further information:
Martin Freeth
Media Relations
Telecom Corporation of New Zealand
Tel: 64 4 498 9361
Mob: 025 242 0174
Email: [email protected]
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