Ann: FORECAST: TEL: Telecom outlines strategy to

• Release Date: 16/05/13 10:39
• Summary: FORECAST: TEL: Telecom outlines strategy to reset for long-term success
• Price Sensitive: No
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TEL
16/05/2013 08:39
FORECAST

REL: 0839 HRS Telecom Corporation of New Zealand Limited

FORECAST: TEL: Telecom outlines strategy to reset for long-term success

Telecom outlines strategy to reset business for long-term success

Telecom is holding its 2013 investor day today, at which Chief Executive
Simon Moutter and his leadership team will set out Telecom's new strategy for
its New Zealand business to investors and analysts.

The strategy outlines the steps Telecom is taking in New Zealand to shift
from a traditional fixed and mobile infrastructure company to a
future-oriented, competitive provider of communication, entertainment and IT
services delivered over its networks and the Cloud.

Investor day presentations will be released via the stock exchange from 1pm
today. In advance of the investor day, Telecom has released the following
financial information which is contained in the presentations.

FY13 operating earnings guidance

Telecom's adjusted EBITDA guidance for FY13 remains $1,040 million to $1,060
million, albeit management expect that the result will be near the bottom end
of this range, primarily due to a further increase in price competition in
the fixed line market and continued margin pressure in Gen-i. This guidance
excludes one-off restructuring costs associated with the FY13 cost reduction
and strategic change programme.

Update on FY13 cost reduction and strategic change programme

On 28 March, Telecom provided an estimate of the impacts of its change
programme, as it seeks to build a leaner, more agile organisation with a
competitive cost structure centred around the right portfolio of business
activities.  As a further update, Telecom now expects one-off restructuring
costs in FY13 of $100 million to $130 million (an increase from $70 million
to $80 million estimated on 28 March). The increase reflects the inclusion of
estimated non-cash accounting adjustments associated with the cessation of
business activities (such as onerous lease contracts and other asset write
offs), which will be finalised at year end.  Approximately half of the
expected total restructuring costs are non-cash in nature.

As noted on 28 March, Telecom expects to reduce its number of full time
equivalent employees from 7,530 at 31 December 2012 to approximately 6,300 to
6,600, by the middle of 2013. As a result, Telecom believes that payroll
costs (Opex and Capex) will reduce by $100 million to $120 million on an
annualised basis. The Opex element of the savings is necessary to offset
anticipated declines in legacy revenues in the FY14 year.

These figures exclude the addition of approximately 140 Revera employees
arising from the recent acquisition of that business.

Capital Expenditure

Telecom's Capex guidance for FY13 is unchanged at approximately $460 million.

Over the subsequent three financial years, Telecom anticipates investing on
average $400 million to $500 million per annum in Capex as it executes the
new strategy.  The phasing of this investment may vary from year to year, due
to the timing of one-off payments such as the acquisition of spectrum. The
majority of this investment will be focused towards mobile network
investment, the Optical Transport Network and business re-engineering
initiatives.

The re-engineering programme, in conjunction with future initiatives to
reduce costs through a centrally-driven, business-wide simplification and
cost reduction programme is targeting $100 million to $200 million of ongoing
annualised benefits, with benefit realisation predominantly from FY15.

- ends -

For media queries, please contact:
Richard Llewellyn
Head of Communications
+64 (0) 27 523 2362

For investor relations queries, please contact:
Mark Laing
General Manager Capital Markets & Investor Relations
+64 (0) 27 227 5890
End CA:00236287 For:TEL    Type:FORECAST   Time:2013-05-16 08:39:26