Scrapped network hurts Telecom NZ profit

Telecom NZ chief executive Theresa Gattung says costs are under control

By CNN's Grant Holloway

WELLINGTON, New Zealand (CNN) -- New Zealand's largest company, Telecom New Zealand, posted an 18 percent drop in annual profits on Tuesday.

For fiscal 2001, it had net earnings of $274.8 million (NZ$643 million).

Profits were hit by a $65 million writeoff to close its planned wireless network in Australia. That one-time cost depressed earnings.

Without it, results were slightly better than analysts' expectations.

A scrapped CDMA network

Telecom NZ moved to full ownership of Australian subsidiary AAPT last financial year.

That prompted it to write off AAPT's investment in its ill-fated CDMA wireless network project in Australia.

But it wasn't all bad news from the Australian investment. Revenues grew 48 percent in that region, compared with modest New Zealand sales growth of 1.4 percent.

Total group revenue jumped 29.6 percent to $2.3 billion.

Chief executive Theresa Gattung said the company is focusing on containing costs in both New Zealand and Australia.

"Expense growth is slowing while revenue growth continues -- a very positive indication of the group's underlying performance," she said in a statement on the results.

Kiwi investors were initially warm with the result, marking up the shares as much as 9 cents to NZ$5.27.

But they also traded into negative territory, as buyers tried to make sense of the earnings. The stock closed just 2 cents higher at NZ$5.20.

Telecom NZ represents about one quarter of the market capitalization of Wellington's benchmark NZSE-40 capital index.

New Zealand stocks closed narrowly down, off 0.01 percent at 2.050.36. They shook off steeper earnings-driven losses in neighboring Australia.