Telecom’s profit

December 20th, 2010 at 4:00 pm by David Farrar

Telecom has just published their second set of regulatory accounts, which breaks down their income, expenses and profit between different sections. The 2010 historical cost accounts show:

  • Access Services (Chorus) – a profit of $571m on revenue of $1,059m, so profit is 54% of revenue
  • Wholesale Services – a loss of $10m on revenue of $925m, so profit is -1% of revenue
  • Retail Services – a profit of $143m on revenue of $3,301m, so profit is 4% of revenue

This shows that basically even Wholesale struggles to make a profit because the charges from Chorus are so high.

This is why will be a good thing (if done properly), as Telecom will have to compete for its profit, not just use the monopoly infrastructure to get it.

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12 Responses to “Telecom’s profit”

  1. AlphaKiwi (683 comments) says:

    Interesting seeing Jim Bolger a while back saying that selling Telecom was a mistake. Of course Roger Douglas was the actual one pushing for it to be sold.

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  2. ben (2,380 comments) says:

    This is why structural separation will be a good thing (if done properly), as Telecom will have to compete for its profit, not just use the monopoly infrastructure to get it.

    I’m not sure that’s right. I think the economic literature would say the vertical monopolist only takes his profit once: vertical separation doesn’t introduce the kind of competition that saves the world from the monopoly. It just gives you more brand names to put on the invoice.

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  3. dimmocrazy (286 comments) says:

    I’d agree with Ben here, this just shows that Telecom still makes the profit in the part of the business where they largely maintain a monopoly. How does this square with Telecom winning many of the broadband extension contracts? Difficult to imagine that Chorus’ competitors would use that sort of margins, hence the old telecom customer (original tax-payer/owner of its infrastructure) appears to be subsidizing that extension of market share in the new “commercial” paradigm. Nothing but nepotism, graft and patronage I would suspect.

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  4. Johnboy (16,597 comments) says:

    Access Services (Chorus) – a profit of $571m on revenue of $1,059m, so profit is 54% of revenue

    So it is obvious that the huge profit is in the lines business. No wonder they do not want to unbundle it.

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  5. Pongo (372 comments) says:

    I hate to say it but the only way NZ consumers will join the rest of the developed world is with some rather stiff price caps on our telecommunications oligopoly. It is the only way that Telecom etc. will be forced to run their business properly. As a now former shareholder who thought their monopolistic position would generate excess returns that never materialized, so unless they are forced into it they wont run their company effeciently off their own back. I travel a lot and once you get away and see how the rest of the world communicate it is quite outragous back here.
    While they are at it the power companies once again are forcing up the wholesale price to nail the start ups and slow the aggresive touting for consumers to switch. Air NZ and Pacific Blue will again hurt consumers with their permission to join up. Its sad but NZ is chock full of oligopily,s and duopoly,s because the powers that be assess their are low barriers to new entrants BUT we dont have many people here so the investment doesnt work and the incumbents are able to behave in appalling ways because of our commercially defecient court systems. Costs us all in the long run and 9 times out of 10 the excess profits go overseas.

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  6. createcoms (16 comments) says:

    “No wonder they do not want to unbundle it.”

    LLU has already taken place. Thus the existence of Telstra, Vodafone, Orcon, Callplus, Compass, etc DSLAMs and Voice equipment in all the big exchanges……

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  7. Viking2 (11,471 comments) says:

    Might be fairer if you related the profit to the funds invested.

    I have said before Telecom should roll the lot up onto drums. Export the gear and sell the property and give the money back to its shareholders. Let all the smart pricks invest their own time and money setting up all over again.

    For all those complaining about prices and profits its a public company, buy some shares and take the profits if they are so good, go elsewhere for the service if you don’t like it. Its a free capitalist world.
    Well it was until you moaning winging socialists decided you knew better and needed to own or control everything and all the companies earnings. i.e. without investing any of your own cash.
    P.S. I am not a fan of Telecom nor an I a shareholder but I uphold their rights to run their own business and you should too.

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  8. Johnboy (16,597 comments) says:

    Chorus turns to Transpower turns back to Chorus again.

    What a rort.

    Max Bradford or one of his clones is involved somewhere. I can sense it

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  9. createcoms (16 comments) says:

    I love the comcom prohibition on Telecom (Chorus) putting a new cabinet in without giving 2 years notice. That’s two years notice in case another competitor feels so inclined to also put a cabinet in the same spot.

    Others that have put cabinets in once this notice has been given:

    Tumbleweed – DISQUALIFIED (due to not being a telco, just happened to pass by at the time).

    What a joke.

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  10. Caleb (479 comments) says:

    does access make good money on the capital invested?

    2bn assets, 571m profit, 57% of revenue.

    not bad.

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  11. Viking2 (11,471 comments) says:

    What about 25% of on capital depreciated and plant in need of replace due to fast moving obsolescence. Go and invest some of your money in them then.
    Are there nay fee marketers and non socialists out there? no I thought not. Well at least not for other peoples assets.

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  12. Anthony (796 comments) says:

    Createcoms what prohibition? Point me to the regulation.

    And monopolies are regulated the world over for good reason.

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