Its shares, having gained 18% in value in recent weeks to trade around $2.80, yesterday closed at $2.72, down 10 cents, or 3.55%, for the day, on steady volume of 11.4 million shares.
As expected by analysts, Telecom maintained earlier guidance levels for full-year earnings before interest, tax, depreciation and amortisation (Ebitda) to decline by 5% to 8%"This result is likely to take the market by surprise," ABN broker Peter McIntyre said.
Telecom's full-year guidance for 2009 is an after-tax profit of $460 million-$500 million, before writedowns. The guidance of three analysts ranges between $463.1 million and $474.7 million.
Ebitda for the nine months to March was down 3% compared with last year at $1.36 billion, while revenue during that period was up 1% to $4.23 billion.
Forsyth Barr broker Suzanne Kinnaird said the $40 million Southern Cross dividend, which was forecast at $10 million, would assist in boosting Telecom's full-year performance slightly.
However, underlying figures have not improved.
"The result was $19 million better than forecast, and even aside from the $40 million dividend, lower tax and the lower costs of mobile sales boosted the result," she said.
Telecom chief executive Paul Reynolds said the stronger performance in the quarter was reflected in the $40 million dividend and "significantly" lower costs of sales in mobiles.
"We have met our far-reaching commitments and all key capital investment programmes have remained on track," he said in a statement.
The continued economic slowdown was impacting on Telecom each quarter, losing up to $10 million every three months, he said.
"We remain cautious and continue to monitor the rising level of unemployment and the impact of the economic slowdown on telecommunications operators and equipment manufacturers globally.
In an earlier forecast, broker Forsyth Barr predicted after-tax profit would fall 19% from last year's $139 million to $112 million, while ABN Amro forecast a 27% decline to $102 million.
Mr McIntyre said even without the Southern Cross $40 million boost, ebitda came in ahead of expectations, with increased revenues from broadband and internet, information technology and data collection.
"There is a strong emphasis on keeping control on expenses," Mr McIntyre said.
The result was important to Telecom, and for shareholders, a resumption in Telecom paying imputation credits on dividends, starting in 2011, made shares more attractive, he said.
He did not believe the two-week delay in Telecom launching its W850 XT mobile phone service, now scheduled for the end of the month, would do it any harm.
The High Court case Vodafone took against Telecom and subsequent out-of-court settlement had raised public awareness of XT, Mr McIntyre said.
Mr Reynolds said the XT network would be faster in more places, have roaming to more than 200 countries and new voice and data plans.
Forsyth Barr has a hold recommendation and 12-month valuation at $3.83 at present under review, while ABN has a hold recommendation and target price of $2.41.
• The brokers' financial disclosure documents are available on request.
