The ongoing effects of the recession are still costly for Telecom, with the company estimating the slowdown had cost about $10 million in the three months ended March.
For the nine months ended March, the cost of the downturn in the economy has cost the telecommunications group a total of $30 million.
Telecom yesterday reported reasonable earnings before interest, tax, depreciation and amortisation (ebitda) of $464 million for the three months, down only 3%.
However, higher depreciation, amortisation and tax costs saw the company's net earnings fall 39% to $97 million for the period.
A 6c-per-share dividend was declared, with no imputation credits. In 2011, the group will target a payout ratio of 90% of adjusted net earnings, with the dividend expected to be fully imputed.
The quarter contained a Southern Cross dividend of $14 million, down from $40 million in the previous corresponding period.
Chief executive Paul Reynolds said Telecom delivered a range of positive results in the quarter, including 128,000 growth in XT connections and 7% mobile revenue growth for Gen-i.
New Zealand's broadband speeds were now measurably faster than Australia or Singapore and Telecom's cost-out programme remained on track.
Full-year earnings guidance had been maintained, he said.
"This result has been delivered in a very challenging operating environment, including increased competition, the continued impact of the economic slowdown, further regulatory interventions and issues with our XT network."
With the results of the independent review of XT published, Telecom's focus was on further improving the resilience of the network and translating that effort into further growth in customers, Dr Reynolds said.
The fixed broadband market growth was stronger than in the three months ended December, with Telecom retail's market share steady at 57%.
In terms of regulation, Telecom had seen further interventions added to an already very complex regulatory model.
While preparing for the radically different, fibre-based world envisaged by the Government's UFB (ultra-fast broadband) initiative, Telecom was continuing to deliver an operational separation model designed for a copper world, he said.
"Our strong focus is therefore on aligning this copper-world regulation with a fibre world to deliver the best result for Telecom shareholders and New Zealanders."
Following a strategic review of the international wholesale business, Telecom had separated it into voice and data components, Dr Reynolds said.
The group was now considering options for the voice component of the business, including merger, divestment or retention.
Telecom was maintaining its guidance for adjusted ebitda for the year ended June to be between 1% and 2% compared with 2009. It was now expected to be near the lower end of the range, he said.
Guidance for adjusted group net earnings was $400 million to $440 million for the year.
