Cellnet to take $148m hit after Telecom NZ contract ends

Telecom NZ to terminate its deal with ASX-listed distributor at the end of September

Cellnet's annual revenues could shrink by $148 million from October following the termination of its distribution and logistics agreement with Telecom New Zealand.

According to a statement posted by the ASX-listed distributor, Telecom NZ has extended its contract with Cellnet until September 30, at which time the two will part company. The deal is part of a transitional arrangement until the telco's WCDMA/GSM network rolls out in November.

The decision is expected to decrease Cellnet's revenues by $148 million from October, or about $1.25m in annual net profit.

"Cellnet is continuing to discuss and finalise these transitional arrangements and options available beyond this transitional phase," the statement read. "These discussions and arrangements are expected to be finalised within the next few weeks and as matters are completed further information will be released."

While admitting the decision was a blow, managing director, Stephen Harrison, was confident it could pick up the net profit in other areas.

"This has been on the cards for a while and it wasn't a surprise. But at the end of the day, we didn't expect it to happen so quickly," he said.

"Telecom has decided to take on a totally different model with its new network, which means the logistics model has to change. We've got until October on this deal and can then start looking at getting ourselves into the new model. It's just that there's no guarantee.

"It's not the best news for us - we were just starting to turn the corner and this comes up. But that's life - you have to take things as they come."

Cellnet and Telecom NZ signed an exclusive distribution contract covering mobile phones and accessories in April 2002 after working together since 1994. At the time, managing director, Stephen Harrison, said Telecom NZ was the distributor's single largest customer and that the deal would substantially increase its presence in the NZ market.

"Telecom has acknowledged that we have done a good job, but the model had to change," he added.

Cellnet reported revenues of $528.2 million in its full-year report to June 30 last year.

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