AAPT enjoys revenue growth from business customers

Australian telco AAPT has delivered revenues of NZ$66 million (AU$51.7m) to its parent company, Telecom New Zealand in the second quarter, up 28 percent on the prior quarter and driven by gains in the business market.

In the first six months of the telco's financial year, AAPT's EBITDA earnings were 2.5 percent up on the corresponding period.

Telecom New Zealand CEO Dr Paul Reynolds said AAPT's strong revenues were driven by "strong sales in business".

AAPT CEO Paul Broad told iTnews that the majority of this growth came from 'mid-band internet' products.

He said AAPT was proving a popular service provider for medium companies up to corporations.

The carrier's "business roadie" campaign was having the desired result, Broad said.

AAPT's sweet spot during the quarter was companies spending between $500,000 and $1 million a year on telecommunications. Broad said that business customers that spend less - between $150,000 to $200,000, for example - find they get far more love from AAPT than its peers.

"These guys don't get the attention from the gorillas," Broad said, referring to AAPT's two larger competitors. "But they sure get my attention."

AAPT is also gaining business from medium sized organisations that are taking a "selective sourcing" approach to IT and telecommunications, farming out $1 to $2 million of their $50 million total spend to AAPT.

Once AAPT gets a customer across the line, Broad said they more often than not sign up to a wider range of services from the telco once they have "built up confidence" in its capability. 

"We are far more flexible in how we do business," he said.

The consumer market

Dr Reynolds said the consumer market "remains the biggest challenge" for AAPT.

Broad admitted the consumer market was still a "problem child" but said the carrier had plenty of plans to address it.

For one, he said AAPT had addressed customer churn issues after completing a transition of customers across to a new billing platform.

"We have been through a terrible experience in moving customers to new platforms," he said. "It is a very difficult process for a telco, considering the multiple products and plans. Its a bloody nightmare."

The transition had generated "a lot of [customer] churn". But with that hard work behind them, Broad said AAPT can offer consumers an escape from the similarly painful project Telstra is still struggling with.

"Now the churn rates [at AAPT] are very, very low," he said.

Second, the telco is investing further in ADSL2+, promoting its "unlimited broadband" plans and marketing more effective service bundles.

Broad said AAPT has "put a stake in the ground" on unlimited broadband and would continue to innovate with unlimited-style plans.

Looking ahead

Dr Reynolds said AAPT was positioned to provide the Australian market with "cloud innovation."

"AAPT is supplying Google Apps to business customers in tandem with network services," he said by way of example.

AAPT recorded flat EBITDA earnings of NZ$27 million (AU$21 million) for the quarter, but underlying EBITDA earnings at NZ$22 million (AU$17 million).

Telecom New Zealand CEO Dr Paul Reynolds said the gap between the two figures was attributable to the last few million dollars of revenue spilling through from a deal with the Commonwealth Bank that was due to expire.

AAPT was "still seeing significant business coming through from the CBA [Commonwealth Bank] contract, but that will eventually come off the books," he said.

The CBA had contracted AAPT to provide network services and fellow subsidiary Gen-i to provide ICT services to the bank between 2000 and 2009, but Gen-i decided not to compete in a tender to provide the CBA's connectivity needs for the next ten years, citing dissatisfaction with the margins available under such a deal.

The CBA has since signed a ten-year, AU$1 billion network outsourcing deal with Telstra.

Telecom New Zealand reports strong earnings

Telecom New Zealand reported quarterly EBITDA earnings of NZ$425 million, up 1.7 percent, bringing its year-to-date (first six months) earnings to NZ$872m, down 1.4 percent on the corresponding half last year.

The company reported a fifth consecutive quarter of year-on-year churn reduction on its traditional fixed network, and significant growth in mobile.

But that mobile growth came at a cost. Dr Reynolds did not shy away from Telecom New Zealand's XT mobile network outage on January 27 that saw service degradation for 200,000 customers and up to 5 percent of cell sites without connectivity for over three days.

Reynolds said the outage came as TNZ doubled its XT mobile customer base from the previous quarter, with campaigns such as "double your minutes" which drove 15 percent voice usage, 'double your data plan' resulting in a 10 percent increase in data use and "unlimited text" driving SMS revenue.

As previously reported on iTnews, the outage was triggered by a fault on an ancillary piece of routing equipment supplied by Alcatel-Lucent. Customers attempting to reconnect caused a "rapid caused a surge on the network that temporarily took out our radio network controller," Reynolds said.

"We've been full on right across the business to diagnose the issues and institute a resilience plan," Reynolds told investors.

It was "a setback", he said, but "one we have had to pay for with the goodwill package."

He expected the outage would cost the carrier some NZ$5 million.

"We believe it is a temporary setback. We are already seeing the foot traffic in our retail stores return to normal."

Dr Reynolds said the company had signed three corporate contracts for mobile services in the last few weeks.

He said customers were "responding to [the] open and honest approach.

"It has been heartening they know they can see its a setback but they know we will fix it," he said.