http://nz.biz.yahoo.com//091105/3/fism.html

Telecom lifted first quarter net earnings 9 percent to $163 million, compared to a year earlier, despite falling revenue.

The company said today the result was due in part to a $43m one-off effect from changes in tax law, while a Southern Cross dividend of $35m was received in the quarter, compared to $39m in the first quarter of the previous year.

Earnings before interest, taxation, depreciation and amortisation (ebitda) of $447m for the three months to the end of September, was 4.1 percent down on a year earlier.

Revenue for the quarter fell 6.5 percent on the equivalent quarter in the previous financial year, to $1.36 billion, while operating expenses fell 7.7 percent to $909m.

Chief executive Paul Reynolds said ebitda remained on track for the company's full year guidance, driven by a combination of revenue growth in mobile thanks to a strong start for the XT mobile network, and continuing progress with costs.

A first quarter dividend of 6c per share is to be paid, unchanged from last year.

Dr Reynolds said Telecom had been successful in a market that had seen a significant rise in competition and customer choice. The company's mobile customers rose a net 64,000 during the quarter, with 242,000 customers on XT at the end of its first full quarter of operation.

XT customers were using their mobile services more, with an increase of 16 percent in average revenue per user on like for like customers, Dr Reynolds said.

Fixed broadband market growth remained stable, around 11 percent, with total connections on Telecom's network reaching 899,000 during the quarter.

Referring to the Government's fibre plans, Dr Reynolds said the current structure made it difficult for Telecom to participate effectively while balancing shareholders' interests.

Discussions had emphasised Telecom's support for the Government's vision and its belief that given the right structure it could partner with the Government to deliver ultra fast broadband faster and more cost effectively, to more New Zealanders than anyone else, avoiding network duplication.

Telecom assessed the impact of the slowing economy at up to $10m during the latest quarter, but chief financial officer Russ Houlden said the potential existed for the impact to increase.

In the Telecom Retail business, ebitda was down 15 percent from a year earlier to $91m.

Telecom Retail chief executive Alan Gourdie said home broadband churn was at its lowest level for three years.

At Gen-i , ebitda was down 30 percent to $40m, due to a 6 percent decline in revenue, reflecting pricing pressure and economic impacts, while costs reduced 2 percent.

Gen-i lifted its market share 1 percent, closing $286m in client contracts during the quarter.

Network business Chorus ebitda lifted 1 percent to $188m for the quarter.

The Wholesale and International business lifted ebitda 3 percent to $61m.

Telecom's Australian arm AAPT lifted ebitda 65 percent to $38m.

The $15m increase in ebitda had been driven by a continued focus on cost reduction as well as on-net products, in line with strategy, AAPT chief executive Paul Broad said.

Telecom said it was maintaining its full year guidance for adjusted ebitda to range between a 1 percent fall and a 2 percent rise compared to the previous year, subject to potential economic risks.

Ebitda guidance for the 2011 to 2013 financial years had been maintained, but Dr Reynolds said that was subject to potential regulatory risks arising from proposals on ultra fast broadband, rural broadband and Telecommunications Service Obligations.

Telecom shares closed at $2.48 yesterday, having ranged between $2.88 and $2.19 in the past year.