Telecom is forecast to book an almost 30% decline in after-tax profit tomorrow, when it delivers its second-quarter result.
However, it should be within earlier market guidance and without any unpleasant surprises.
Despite the after-tax decline, forecast equipment write-offs and declining revenues, Telecom's short-term share-price support was not expected to be affected, ABN Amro Craigs broker Peter McIntyre said yesterday.
"Telecom will be reporting `Ferrit free', displaying some retail revival and mobile survival, which were all key messages from its first AGM under its new chief executive [Paul Reynolds]," Mr McIntyre said.
Forsyth Barr broker Peter Young forecast a second-quarter decline of -0.3% from New Zealand revenue and negative revenue growth in Australia because of lower local service and resale revenues, further compounded by a less favourable foreign-exchange position.
"We expect growth in broadband, Internet and information technology services to be offset by declines in mobile and fixed voice revenues," Mr Young said.
Recent trends of declining fixed voice and mobile revenues will be slightly offset by growth in broadband revenues and IT services but would leave revenues of the Telecom group "broadly flat", while remaining within earlier guidance, he said.
"Telecom highlighted several cost-reduction programmes last quarter and we expect further updates on cost containment given the flat revenue environment," Mr Young said.
"We expect Telecom to have again lost about 25,000 to 30,000 retail fixed lines over the December quarter but to have achieved modest growth in mobile customers.
"We're looking for improved growth in broadband customers," Mr Young said.
Mr McIntyre said Telecom had exited its loss-making Ferrit, which was its attempt to incubate a TradeMe or Amazon-type online venture, which had been an expensive foray for Telecom.
Telecom was now focusingon customer service, implementing competitive pricing in both broadband and mobile services and in upgrading technology in general, Mr McIntyre said.
"Management realignment around some core products suggests a more decisive and pragmatic leadership in its retail," Mr McIntyre said.
Globally, stock yields had been hit hard, but Telecom had several positives in its favour, including a falling New Zealand dollar, making it more attractive to foreign investors, and a "relative" defensive-stock cashflow and dividend yield of 9.2% (at $2.60 per share), he said.
Both brokers were forecasting a 6-cents-per-share dividend for the quarter.
Mr Young was not expecting any change to earnings guidance, with earnings before interest, tax, depreciation and amortisation down 5% to 8% for the year.
However, the lower New Zealand dollar raised the possibility of increased equipment capital-expenditure guidance.
