I was Wrong... sort of

With the New Zealand Yellow Pages Group in apparent financial trouble (who would have thought that would happen after the purchasers borrowed most of the money to buy it !) I must revisit a statement I made about the sale by Telecom New Zealand [TEL.NZ] back in 2007.

I criticised the company for selling a profitable part of their business at a time when the company's other units were mature with falling revenue and future falling profits.

It looks like I was wrong, (and this is where the sort of comes in) Telecom owning Yellow Pages was profitable because of the long established nature of the unit within the company and low base cost but when sold the new owners had far too much debt to make the whole thing work.

People are using the internet more for searching numbers (I use Yellow and White pages online and it is free) and the books seem redundant.

The price Telecom got was superb compared to its worth now, probably less than half its sale price to the current owners and worth less than its debt mountain.

Telecom made a smart move and I praise them for that (now), credit where it is due and all that and that credit goes to Theresa Gattung. The best and only good thing she did for the company she used to head - sorry I couldn't help myself there.


Telecom NZ @ Share Investor

Telecom NZ: TV3 60 Minutes Segment more like Corporate PR
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Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
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Telecom rewards Gattung for mediocrity

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Telecom New Zealand Hangs Up.

Telecom New Zealand's [TEL.NZ] profit announcement last week reveals a company in gradual decline.

There are many reasons for this, not the least of them being the fact that management have always had a siege mentality to competition, that is, they tended to respond to rivals in a reactive rather than a proactive way. Their customers suffered on monetary and service levels simply because Telecom's monopoly position allowed them to do so.

When Government moved to untangle their monopoly their shortcomings were revealed to a greater extent than we already knew. Overwhelming arrogance seemed to be the order of the day.

Underspending in infrastructure over the last 18 years has left the company in a position where it now would have to spend multi billions just to get their networks and infrastructure up to speed to present day technology so they could offer their customers anything close to high speed broadband or mobile technologies that allow modern fast content.

The shortsightedness of the past seems to pervade Telecom's culture to the core. I say this because the companies answer to falling profits and revenue in the fixed line business was to sell the Yellow Pages unit to a Canadian Pension Fund for NZ$ 2.2B earlier this year. Roughly half of the proceeds will be dispersed to shareholders.

The Yellow Pages unit was one of Telecoms most profitable divisions, contributing over $200M in before tax profit and set to increase revenue and profit in years to come. The new owners have increased their own advertising for their product and are concentrating on growing their online presence.

As a business owner myself I would be ditching declining businesses rather than flogging off the most profitable.

To be sure $2.2 B is a nice little wedge of moola but it is a short sighted of management not to look towards its future in a more considered manner.

Most of Telecoms other businesses are either mature or near maturity. Fixed line is in decline, Mobile is reaching saturation and "Broadband" or what Telecom call broadband is constrained by their 19th century copper wire outlook in a 21st century world.

Lessons that should have been learned in the 1990s: lack of investing back in the business, slow to respond to competition etc, still haven't reached managements brain stems and look unlikely to do so unless coerced by Government intervention.

Management even suggested last week that Taxpayers should fund the badly needed infrastructure needed if New Zealanders "...wanted broadband quicker...".

For a communications company, Telecom New Zealand are not communicating the right message. Its customers continue to get an engaged signal and its clear message to the public at large is that they just don't care.


Telecom NZ @ Share Investor

Telecom NZ: TV3 60 Minutes Segment more like Corporporate spin
Telecom Share Price Limbos but has it jumped the Shark?
Telecom NZ: Saint Gattung gets her Ya Ya's out
Telecom NZ: Bye Bye Paul Reynolds
Long Term View: Telecom NZ Ltd
Stock of the Week: Telecom Ltd
Revisiting Telecom
Getting cute and fluffy with Teresa Gattung
Telecom NZ Hangs up
Business Gobbledygook puts up barriers to communication
A Rare Breed
Telecom NZ facing a watershed period
Biology a major key in "glass ceiling" for women
Telecom rewards Gattung for mediocrity

Download every available TEL Annual Report Free


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