Sharebrokers Forsyth Barr and Craigs Investment Partners are retaining their hold recommendation on Telecom shares while at the same time revising their profit forecasts.
Telecom on Thursday announced it had cut its earning guidance for its 2011 to 2013 years and kept the guidance the same for 2010.
The changes reflected Government regulatory decisions and a softening revenue outlook due to lower mobile revenue growth, price pressures in voice and data markets, flow-on effects of the economic downturn and management initiatives to drive harder on cost-out programmes.
The company also announced that 200 management jobs would be cut.
Other new information revealed in a conference call included: Project 2011 capital expenditure of up to $1.1 billion; XT had 585,000 customers at March 31, despite outage problems; Gen-i's customer base was stable; total mobile customer base down 19,000 to 2.3 million, with most of the losses from low-value prepaid CDMA users; structural separation appears to be an option again.
Forsyth Barr broker Suzanne Kinnaird said her forecasts were already within, but towards the upper end, of the new guidance range and she was reducing her operating profit forecasts by about $30 million.
That reduced the forecast net profit to $350 million for 2011 (down 8%) and $420 million for 2012 (down 11%).
The 200 job losses were expected to save about $30 million of annual costs.
"Many of these are probably part of the five-year cost-out plan announced two years ago and detailed at last year's briefing day."
Telecom's share price of $2.18 was down 10c and below Forsyth Barr's valuation of $2.76, but Ms Kinnaird believed it was close to its low point although she expected news flow to remain negative for several months.
Craigs broker Chris Timms also has a hold on Telecom shares, with a share price target of $2.11.
Telecom's profit guidance downgrades brought the company closer to market expectations, he said.
