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Telecom Corp [NZX: TEL] has sold its Australian AAPT unit for A$450 million to ASX-listed internet service provider, TPG Telecom, beating initial expectations of what the unit would go for.
Analysts had picked a sale price of $A300 million to $350 million fot the Australian division, but a reported bidding war between TPG, rival iiNet and the Ontario Teachers’ Pension Plan appears to have pushed up the price.
The Macquarie-managed sale is expected to be completed on Feb. 28, and was at a multiple of about 6.4 times AAPT's recurring annualised earnings before interest, tax, depreciation and amortisation of $70 million, Telecom said in a statement. When Telecom announced the unit was up for sale in October, Australian media reported AAPT could fetch as much as A$403.5 million.
The proceeds will be used to repay debt in the first instance, and Telecom will provide more guidance on where the remainder will go at its first-half profit announcement nex February.
Under the new leadership of chief executive Simon Moutter, Telecom has been refocusing its strategy to targeting mobile and data revenue and backing away from being a simple infrastructure player.
"The sale of AAPT is consistent with this strategy and with our desire to focus principally on our New Zealand operations and on the needs of New Zealand customers," Moutter said. "AAPT is performing well. David Yuile and his management team have done an impressive job during the last three years to simplify, stabilise and reshape the company."
Telecom sold its AAPT consumer division to ASX-listed iiNet for A$60 million, leaving the New Zealand company with wholesale customers for its network infrastructure. The Australian unit has been a perennial underperformer for the company since it spent A$2.3 billion to acquire AAPT at the height of the dot-com boom in 1999 and 2000.
The AAPT unit reported a 16 percent drop in earnings to $74 million in the year ended June 30 on a 22 percent slump in sales to $515 million, with the decline heightened by a stronger kiwi dollar. The unit lost customers amid market consolidation in the Australian Federal government's National Broadband Network roll-out.
Shares in Telecom fell 0.7 percent to $2.285, and have edged up 0.4 percent this year. The stock is rated an average 'hold' based on nine analyst recommendations compiled by Reuters, with a median target price of $2.40.