Business Description:
Telecom Corporation of New Zealand Limited (TEL) is the predominant NZ telecommunications service provider, offering a range of services and products to consumers and businesses. Telecom also carries voice and data traffic on the Southern Cross Cable and other cable and satellite systems. Telecom operates the following business units: Telecom Retail, Gen-I, Telecom Wholesale and AAPT-PowerTel.

Strategy Analysis:
TEL is well-positioned to respond to changes in the industry. After demerging its wholesale division, greater focus will be placed in its mobile division. Despite high penetration in handsets in the NZ mobile market, we expect smartphones to be the main driver for revenue growth as consumers upgrade their handsets. We expect postpaid ARPU to grow as smartphones continue to penetrate its postpaid subscriber base, leading to data revenue growth. The fixed broadband market continues to grow well in New Zealand. We do not see wireless broadband to be a direct substitute for fixed broadband given technological differences. Telecom Corporation of New Zealand reported NPAT down 56.8% to NZ$164m for the year ended 30 June 2011. Revenues from ordinary activities were NZ$5.12bn, down 2.8% from last year. Basic and Diluted EPS was 9 NZ cents compared to 20 NZ cents last year. Net operating cash flow was NZ$1.35bn compared to NZ$1.76bn last year. The final dividend declared was 7.5 NZ cents, taking the full year dividend to 20 NZ cents compared with 24 NZ cents last year. The company advised that it anticipates demerging Chorus in the FY12 financial year and therefore all financial guidance has been removed.