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When announcing its full-year profit of $398 million dollars on Friday Telecom said the impact of the slowing economy had cost it about $40 million over the last year.
But a slow economy is not the only thing Telecom has to worry about in the future, according to Rosalie Nelson from specialist market intelligence firm IDC.
Nelson says the telecommunications industry as a whole is nigh on a "perfect storm" with the economic squeeze from the recession, increasing regulatory pressures, and a migration of core business away from legacy revenues.
Legacy revenues, such as those from existing services using copper e.g. landlines, have in the past generated high margins but the focus is now on lower margin and more competitive services such as IT and broadband.
"At the moment that transition is proving very challenging and the new revenues are not growing fast enough to offset the legacy revenues," she says.
One year ago, Telecom was forced by the government to split into three separate business units - retail, wholesale and network.
Telecom on Friday said that the year has been characterised by big changes including those associated with the separation and establishment of its network business Chorus.
Nelson says Telecom's relationship with the government over regulatory issues has improved since the split but significant regulatory pressures remain.
"The fact that they did not do the operational separation voluntarily meant that unlike BT in the UK they didn't get any win-back, and sort of relief, on some of the regulatory areas that BT managed to get," she says.
Nelson says Telecom is taking the incumbent approach - reducing costs, protecting legacy revenues, growing some of the sectors like IT services and looking to where it can expand in other markets.
In May, the company rolled out its third generation mobile XT network, a move which Nelson describes as critical.
"They needed to make that investment. Mobile broadband is going to be one of their core focus areas, I think, over the next five years, and certainly it is one of the growth sectors for them," she says.
She says the need and demand for data connectivity and the management of it will be a big opportunity for the industry overall.
New opportunities will also arise with the government's planned ultra fast broadband roll-out.
However, Nelson says these opportunities will be accompanied by
pressures that will change the regulatory environment again,
bringing new challenges for Telecom and others in the
industry.
