Share Investor: Telecom New Zealand 2011 first quarter profit review

The Telecom New Zealand Ltd [TEL.NZX] first quarter 2011 result out today of NZ$103 million after tax is 36.8% lower than the result for the same period last year. This comes on revenue of $1.316 billion, down 2.9% on last year.

This comes in a year of turmoil for the company where its share price plunged and regulatory issues continued to hamper growth and future planning.

Telecom CEO, Paul Reynolds, said operational performance was "satisfactory with good cost control offsetting significantly higher regulatory costs and intensifying competition."

I see more of the same for full year 2011. With a stagnant to dropping revenue base the only way profit can grow slightly or stay at current levels is to cut operational costs further. Not good for the long-term.

Key Points

Net profit: 103,000; Down 36.8%; 163,000

Total operating revenue (before adjusting items): 1,316,000; Down 2.9%; 1,356,000

Earnings per share: 5 cps; 9 cps

First Quarter Dividend: 3.5 cps

Increased competition impacting on margins

Management appear reticent to make too much of future profit levels because of probable impacts of the rollout of the fast fibre network, but they have indicated a small increase in earnings before tax for 2012 - 2013.