Profit falls as Vocus deal nears

The sale of the country’s fourthlargest telecommunications company, Vocus New Zealand, should be agreed by the end of June, its Australian owner says.

However, Vocus chief financial officer Mark Wratten said it could take a bit longer to complete the sale, if it was held up by regulatory approvals.

Vocus is best known in New Zealand as the owner of internet providers Slingshot and Orcon, which supply broadband to about 196,000 Kiwi consumers and electricity to about 12,000 homes.

Vocus, which is listed on the Australian stock exchange, signalled last year that it planned to sell its New Zealand arm to reduce its debt and fund its capital expenditure programme in Australia.

Sources said indicative bids had now been received from possible buyers.

Vocus shares slumped 11 per cent on the ASX yesterday after the company reported a profit drop for the six months to December and revised down its operating profit guidance for the full year by A$5 million to A$10m.

Spark, Vodafone, 2degrees and Trustpower are all believed to be interested in acquiring Vocus NZ, assuming none are blocked by the Commerce Commission.

While there is no certainty the commission would have any issues with Spark or Vodafone emerging as the buyer, Vocus is under some pressure to complete the sale promptly to maintain the headroom it has within its banking covenants.

That could favour either an early announcement by Spark or Vodafone of a deal, unless there is an alternative buyer.

One of the attractions for buyers is that almost a third of Orcon and Slingshot customers are on ultra-fast broadband (UFB) and the company calculates it is now providing more than one in eight UFB connections.

Wratten said that if the sale was not completed by June 30, he expected Vocus would have ‘‘a fully binding sale agreement’’.

‘‘The only reason financial close could be delayed would be regulatory approval in New Zealand. We will have to evaluate that at the time final bids are due.’’

Vocus reported a 21 per cent drop in its net profit for the six months to December to A$37m (NZ$39.7 million), despite revenues climbing 9 per cent to A$967m.

In New Zealand, consumer revenues fell 1.1 per cent to NZ$92m, but sales to businesses were up 10 per cent at NZ$91m.

Chief executive Geoff Horth said the growth in Vocus NZ’s enterprise business had been strong and he believed the New Zealand business was capable of earnings growth.

In January Vocus NZ was added to a panel of suppliers able to offer networking, internet, fixed-voice, personal-connectivity and managed-security services to government agencies.

In the same month it also reduced the price of its Slingshot gigabit UFB plan to $99.95 per month – a price that is about $10 less than most other lower-cost providers, according to price comparison site Glimp.