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Vodafone full-year operating profit soars

NZ NewswireNZ Newswire 5/09/2016 Jonathan Underhill

Vodafone New Zealand's full-year operating profit has almost tripled as it seeks regulatory approval to merge with Sky Network Television.

Operating profit jumped to $50.2 million in the 12 months ended March 31, from $17.2m a year earlier, the local unit of British Vodafone Group reported on Tuesday.

Gross profit fell to $1.04 billion from $1.05b but was more than made up for by a 4 per cent drop in operating expenses.

Its net loss narrowed to $18.3m from $90.5m, largely reflecting a 40 per cent reduction in finance costs to $82.7m, after it refinanced debt to its parent and issued $300m of equity.

Vodafone NZ took on debt to acquire TelstraClear from Australia's Telstra for $840m in 2012, saying at the time it expected to reap savings through ending management and back-office double-ups, and by using TelstraClear's backhaul and transmission services.

However, it didn't count on aggressive competition from newly appointed Spark boss Simon Moutter, who slashed broadband prices at the nation's dominant provider to prevent customers "simply leaving us on price".

"Being the market leader, that caused a revaluation of the entire sector," Russell Stanners, Vodafone NZ chief executive said.

Revenue rose to about $2b in the latest year from $1.96b a year earlier, and Mr Stanners said he was pleased to get that growth "particularly in the market we operate in".

Still, the cost of sales rose to $954m from about $912m.

In July, Sky shareholders voted in favour of the proposed merger with Vodafone to create a media provider with combined 2016 revenue of more than $2.9b and more than 3.7m separate mobile and fixed connections, and television subscriptions.

Under the proposal, Sky will purchase Vodafone NZ from its parent company for $3.44b.

Vodafone becomes a 51 per cent majority shareholder in Sky, in what amounts to a reverse takeover, with Mr Stanners to become chief executive of the merged company.

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