New Zealand's Telecom Corp falls on poor outlook

New Zealand's Telecom Corp slumped 8.53 percent Friday after predicting it would struggle for earnings in the current financial year. While the country's largest telecoms firm booked a seemingly spectacular 600 percent rise in annual net profit, it said the figure was meaningless as the reporting period included a major demerger. Telecom said adjusted net profit was up just 8.8 percent to NZ$422 million ($342 million) in the 12 months to June and forecast a "flat to low single digit decline" in earnings performance during the current financial year. Acting chief executive Chris Quin insisted it was a "satisfactory" result in an increasingly competitive market. "Core business such as domestic fixed line access, calling and data continue to decline and are partially offset by growth in mobile and broadband," he said in a statement. Telecom split from its network arm Chorus late last year, agreeing to dilute its market dominance in return for the government awarding Chorus about 70 percent of contracts for a planned ultra-fast broadband network. When the demerger took place, Chorus made a one-off cash payment of NZ$863 million to Telecom, helping its annual net profit soar to NZ$1.16 billion from NZ$166 million in the previous year. Telecom said in a statement to the New Zealand stock exchange that the net profit figure was "not meaningful due to (the Chorus) demerger". Under the deal, Telecom continued as a retail-focused business, selling fixed-line, mobile and broadband services to the public. Chorus became a separately listed company, concentrating on building the new broadband network and supplying wholesale broadband to other companies that then sell services to the public. Telecom said while earnings could decline during the current financial year it was preparing to compete aggressively to maintain its share of the broadband market. Adjusted revenues slipped 8.9 percent to NZ$4.54 billion over the year. Telecom shares ended down 8.53 percent at NZ$2.52.