Telecom's Q1 results briefing was dominated by one question today – what is the company going to do about Ultra Fast Broadband?
Analyst after analyst questioned CEO Paul Reynolds on what it will do to company profits, the kind of modelling the company is undertaking, whether it should partner with Vector in Auckland, what the ROI on an LFC is likely to be, if Chorus makes up 40% of EBITDA today, how will it effect future earnings. None of which he had a clear answer on.
"If I had an obvious plan I'd tell you what it is, we are modelling like mad," he told them. "We've turned every stone, we've been open with the government.
Reynolds says the company is looking globally at other models but that the NZ government's regionally based approach is unique in the world. He told TR afterwards that he wasn't surprised by the analysts' questions, because UFB will have the biggest impact on shareholders, along with changes to the Territorial Service Obligations. Regulatory issues such as mobile termination rates, or competition from Kordia's proposed trans-Tasman cable are side issues.
Chorus CEO Mark Ratcliffe says that by 2011, 84% of New Zealanders will be within "a couple of kilometres" of a fibre line.
While the Q and A was dominated by UFB, Reynolds covered plenty of other aspects of the business, in particular the growth of the mobile WCDMA XT Network which now has 242,000 subscribers, which he called "a key plank in our plans".
Here are some of the highlights:
XT Network
· 64,000 new mobile customers – taken from Vodafone, Reynolds described 2degrees customers as "operating two SIMs".
· Average Revenue Per User 16% higher for XT users on the old CDMA network and ahead of expectations.
· 16% of Telecom's mobile customers are on XT and they generate 29% of mobile revenue.
· Netbooks and notebooks will boost data usage, particularly with the upgrade to HSPA+ technology in December, and an exclusive deal with Noel Leeming for post-pay customers has been arranged.
Chorus
· Industrial action that plagued the network division as a result of Visionstream introducing new owner-operator model in Auckland and Northland has ceased. Engineers are now mostly on board with the new model.
· Service levels are ahead of last year.
· Looking to make cost savings of $3 million in the next year.
Telecom Wholesale
· MNVO arrangements on the XT Network expected be announced in the couple of weeks (Telecom had originally said it wouldn't wholesale its network for the first 18 months, but that appears to now be under review).
· Commerce Commission's announcement today that it will prosecute over loyalty discounts "disappointing".
Gen-i
- EBITDA down 30%, with revenue down 6%- $286 million in client contracts closed (up from $231million in prior year)
-1% ICT market share gain
