Telecom Corporation of New Zealand Limited (TEL)



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General Information
Company Name: Telecom Corporation of New Zealand Limited
Stock Code: TEL
Website: www.telecom.co.nz
GICS Sub-Industry: Integrated Telecommunication Services
Market Cap ($M): 4,809
Equiv. Shares (M): 1,829

Current Price Data+
Current Price Open High Low Last Close Volume Price Movement
$ 2.630 $ 2.630 $ 2.650 $ 2.615 $ 2.630 3,185,197 0%

Current Broker Consensus Recommendation more
Recommendation: Sell (3.6667)
Recommendation Date: 21st Jul 2014
Brokers Surveyed: 3

Company Overview

Business Description:
Telecom Corporation of New Zealand Limited (TEL) is a NZ telecommunications service provider, offering a range of services and products to consumers and businesses. The Company operates the following business units: Telecom Retail, Gen-I, Connect, Telecom Wholesale & International and Technology and shared services.

Strategy Analysis:
TEL is well-positioned to respond to changes in the industry. After de-merging its wholesale division, greater focus will be placed in its mobile division. Despite high penetration in handsets in the NZ mobile market, we expect smartphones to be the main driver for revenue growth as consumers upgrade their handsets. We expect postpaid ARPU to grow as smartphones continue to penetrate its postpaid subscriber base, leading to data revenue growth. The fixed broadband market continues to grow well in New Zealand. We do not see wireless broadband to be a direct substitute for fixed broadband given technological differences. Telecom Corporation of New Zealand reported NPAT down 83.9% to NZ$162.0m for the half-year ended 31 December 2012. Revenues from ordinary activities were NZ$2.14bn, down 9.5% from the same period last year. Basic and Diluted EPS was 9.0 NZ cents compared to 52.0 NZ cents last year. Net operating cash flow was NZ$424.0m compared to NZ$504.0m last year. The interim dividend declared was 8.0 NZ cents compared with 9.0 NZ cents last year. Comparisons with previous periods are complicated by the demerger of Chorus which took effect from December 2011. Reporting on continuing operations, after adjusting for non-recurring or unusual items, provides the most meaningful view of the company's performance as a separate company. On this basis, adjusted EBITDA was 3.7% higher, as reduced operating costs (principally due to lower labour costs and changes in Chorus trading arrangements) more than offset a decline in operating revenue.


Financial Summary
Year to Jun NPAT EPS EPS chg (%) PER DPS Yield (%) Franking (%)
2015  F 273.2 15.0 0.0 17.5 14.2 5.4 0.0
2014  F 273.3 15.0 -6.6 17.5 14.4 5.5 0.0
2013  A 295.7 16.1 38.7 11.9 12.8 6.7 0.0
Source: Morningstar analyst estimates.

Peer Comparison
EPS Growth (%) P/E (%) Dividend Yield (%)
Company Mkt Cap 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F 2013 A 2014 F 2015 F
Chorus (CNU) $612 M 0.9227 -0.1155 -0.4647 4.3411 4.9079 9.1691 0.1390 0.0000 0.0179
M2 Group (MTU) $1,076 M 0.0675 0.9256 0.1134 22.0577 11.4549 10.2883 0.0336 0.0421 0.0507
Telecom NZ (TEL) $4,846 M -- 0.0651 0.0460 17.0747 16.0315 15.3268 0.0509 0.0604 0.0604
Telstra (TLS) $67,566 M -0.0288 0.0523 0.0516 17.7451 16.8634 16.0366 0.0516 0.0534 0.0534
TPG Telecom (TPM) $4,279 M 0.6339 0.1884 0.2064 28.6855 24.1379 20.0074 0.0139 0.0170 0.0198

Market Comparison
Earnings P/E Ratio P/B Ratio P/E Growth P/S Ratio
TEL 0.78 15.9 4.03 2.87 1.40
Market 0.97 16.4 1.26 2.11 1.65
Sector 0.26 17.0 3.69 1.59 1.84

Directors
Name Position Start Date
Mr Simon Paul Moutter Chief Executive Officer,Managing Director 01 September 2012
Mr Mark Verbiest Non-Executive Chairman 01 December 2011
Dr Murray James Horn Non-Executive Director 01 July 2007
Mr Charles Sitch Non-Executive Director 01 December 2011
Ms Justine Smyth Non-Executive Director 01 December 2011
Ms Maury Leyland Non-Executive Director 01 December 2011
Mr Paul Berriman Non-Executive Director 01 December 2011
Mr Ido Leffler Non-Executive Director 09 June 2014

Management
Name Position
David Yuile CEO - AAPT
Tim Mile CEO - Gen-I
Chris Quin CEO - Retail
Rod Snodgrass CEO - Telecom Digital Ventures
Jolie Hodson Chief Financial Officer
David Havercroft Chief Operating Officer
Sarah Miller Company Secretary
Joe Mccollum Group HR Director

Substantial Shareholders
Holding Name
128,978,201 (7.10%) BlackRock Investment Management (Australia) Limited (formerly Barclays Global Investors Australia)

Calendar of Events
Date Event
20 February 2015 Report (Interim)
22 August 2014 Report (Prelim)
22 August 2014 Report (Annual)
© 2011 Morningstar, Inc. All rights reserved. The data and content contained herein are not guaranteed to be accurate, complete or timely. Neither Morningstar, nor its affiliates nor their content providers will have any liability for use or distribution of any of this information. To the extent that any of the content above constitutes advice, it is general advice that has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. Before acting on any advice, you should consider the appropriateness of the advice and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. If applicable investors should obtain the relevant product disclosure statement and consider it before making any decision to invest. Some material is copyright and published under licence from ASX Operations Pty Limited ACN 004 523 782 ("ASXO"). DISCLOSURE: Employees may have an interest in the securities discussed in this report. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.asp.

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