TEL
28/09/2012 09:41
ADDRESS
REL: 0941 HRS Telecom Corporation of New Zealand Limited
ADDRESS: TEL: Telecom AGM - Chairman's Speech
28 September 2012
MEDIA RELEASE
Telecom Corporation of New Zealand Limited
Chairman's speech delivered at the 2012 Annual Meeting, Telecom Place,
Auckland at 10:00am on 28 September 2012:
This is my first annual meeting as Telecom chairman and your first meeting as
owners of what is essentially a very different business.
The financial year ended 30 June 2012 was arguably the most pivotal in
Telecom's history. As you will be aware, the company demerged as of 1
December 2011, the fixed access network business owned by Chorus Limited
being split away following shareholders voting in favour of demerger.
Following demerger the value of both Chorus and Telecom shares has increased
which has meant you have enjoyed significant total shareholder returns in the
last 12 months.
Throughout the 2012 financial year and subsequently, we have continued to
simplify Telecom's offerings, and right-size the business to compete in a
challenging market. This continued focus on cost and rationalisation makes
sense given the company is now essentially a retail service provider.
To continue to do well for our shareholders, we must focus on winning
customers with both service and products.
FY12 review
Looking back at the financial year 12, a rigorous focus on cost management
and simplification has delivered a satisfactory financial result.
Although year on year comparisons are difficult given the separation with
Chorus, when adjusting for one off items, and despite all the distractions
and leadership time dedicated to the UFB and demerger process, the company
delivered largely flat EBITDA on a pro forma basis.
Adjusted revenues, allowing for one off changes, declined roughly 9% compared
to the prior year. However this decline in revenue was offset by reductions
in operating expenses which fell by more than 12% compared to the prior year.
Free cash flow generation of $656m has improved significantly and the
resulting 20c dividend - the same level as last year when we had Chorus on
board - is testament to the focus on costs and the commitment of management
to our business goals.
At financial year end we had returned $169m of surplus capital, as part of
the ongoing share buyback which we announced at the start of this calendar
year.
We sympathise with shareholders seeking to understand the complex financial
statements provided to you in the annual report. This was an inevitable
consequence of the demerger.
We have endeavoured to provide meaningful adjusted comparisons to the
previous year. I can assure you that the results for the current financial
year and beyond will be easier to follow.
We have also included a large amount of information in order to be
transparent about the matters you should care about as investors. We are
happy to answer any questions on the annual report you may have.
Outlook FY13
In the August announcement of our financial results for FY12 we noted our
initial views on the outlook for the current financial year.
In this we said the outlook was for a flat to low single digit percentage
decline in our EBITDA. This outlook is being driven by our renewed
competitive stance in order to hold our broadband market share, which we
regard as essential for the long term health and future of our business.
For the current financial year we intend to pay 90% of adjusted net earnings
as dividends and expect imputation to be between 70% and 100%.
This view is also prior to Simon completing a strategic review which we have
required he deliver to us in the latter part of this year. We expect to be
able to talk about this early next year.
Rightsizing the business
A key benefit of the Demerger was that it allowed for a reset of the
regulatory environment and the ability to focus the company on reshaping
itself to take on the challenges and opportunities of a new operating
environment.
Telecom now competes on a more level playing field with other
telecommunications providers. Competition is high and the regulatory reset
allows us to be more single minded on delivering for customers.
It is this single-mindedness that will deliver the results that shareholders
demand and the company will do it as cost efficiently as possible.
New Telecom board
With effectively a new company came a largely new board.
Provided you approve Simon Moutter's executive directorship and re-election
of myself and Paul Berriman, we will be at the helm over the coming year with
stalwarts Murray Horn and Kevin Roberts and new directors Charles Sitch,
Justine Smyth and Maury Leyland.
This is a very strong board. A lot of care and thinking went into ensuring
the Board would have the right balance of values and functional expertise,
could draw on deep experience in the telecommunications market from both here
and overseas, and had a diverse skill-set gained across a range of relevant
industries.
We're committed to driving the change necessary to enable Telecom to thrive
now and into the future.
During the year we farewelled Wayne Boyd, who chaired and led your company
through a difficult period. He left it in very good heart and with a sound
platform to move forward- we thank him for his leadership and wisdom.
CEO transition
It would also be remiss of me not to mention Paul Reynolds.
His five years at the helm of Telecom were instrumental in seeing the
business through a significant period of change. He came into Telecom at a
difficult time, and more recently, along with Wayne Boyd, Paul's commitment
to steering Telecom through winning the UFB tender (for Chorus) and through
the successful demerger cannot be understated. This led to a substantial
uplift in total shareholder returns.
And of course we ushered in the new financial year by welcoming Simon
Moutter.
We conducted an exhaustive international search. Simon stood out.
Simon gets Telecom. He understands the demands of our shareholders and that
the customer is paramount. He knows the importance of this company to the
country.
He is both pragmatic and ambitious in his hopes for Telecom. His passion for
this business is clear and you will hear from Simon soon.
Shareholders should feel enthusiastic about having Simon in the driving seat
given Simon did an exceptional job at Auckland International Airport Limited.
We believe we are due an exciting and rewarding period under his leadership.
I hope you have the chance to meet him today.
Conclusion
Customer focus. I mentioned it before and it is key to the success of this
business.
The market will continue to be challenging and further industry consolidation
will bring increased competition.
The business understands that it must strip out the clutter.
We must maintain a relentless focus on the customer, on Telecom's core
products and services in broadband, mobile and ICT, in order to produce the
returns you seek and ensure Telecom has a sustainable platform for future
growth.
We expect major strides to the development of New Zealand's ultrafast fibre
network over the coming year.
Telecom will be prepared. Significant investment has already been made and
once network becomes available, Telecom will be in a position to offer
competitive products.
We have a strong board, a new CEO in place and a seasoned leadership team.
With your support we will continue to deliver shareholder returns and ensure
Telecom maintains a position of strength in the market.
Ladies and gentlemen, I would now like to introduce you to Telecom's CEO
Simon Moutter.
Thank you.
End CA:00227859 For:TEL Type:ADDRESS Time:2012-09-28 09:41:50
