In a refined proposal to Crown Fibre Holdings, Telecom has formalised its proposal to split its wholesale and retail operations.READ ALSO: Could two Telecoms be worth more than one? Analysts weigh in"Our proposal is predicated on the structural separ
In a refined proposal to Crown Fibre Holdings, Telecom has formalised its proposal to split its wholesale and retail operations.
READ ALSO: Could two Telecoms be worth more than one? Analysts weigh in
"Our proposal is predicated on the structural separation of Telecom, through a demerger into two companies which would give rise to Chorus2 as a new and entirely standalone company," Telecom chief executive Paul Reynolds said in a statement.
Dr Reynolds first floated the idea of a "de-merger" during an analyst briefing in Sydney on May 24.
Such a structural split would get around the prohibition on a full-service telecommunications company holding a majority stake in a Crown Fibre business.
Some 75% shareholder approval would be needed for the separation to take place, Dr Reynolds said.
The chief executive has formerly also said that Telecom's major debt holders would also need to approve a split.
During his May 24 presentation, Dr Reynolds saw existing shareholders' having their shares evenly split between the two new Telecom companies, which would be separately listed.
However, no such details were available this afternoon in the relatively bare-bones statement. Bids are confidential.
Analysts and competitors will also be wondering which assets would be transferred to Chorus2 - with the local copper loop being a particular point of contention.
Telecom shares (NZX: TEL) were up 1.5% to $2.02 in the immediate wake of the announcement, against a broader market rise of 0.18%
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Reynolds' veiled threat
Chorus boss steps aside to focus on Crown fibre bid
The latent threat
Today's announcement did, of course, accentuate the positive, and the extent Telecom is willing cooperate during the bidding process.
Yet Dr Reynolds has also previously canvassed a flipside to de-merger, should the ploy not prove enough to win some or all of the Crown Fibre tender: an unreconstructed Telecom that competes vigorously against the winners, cherrypicking the most commercial customers.
“Non-participation would entail continued selective investment in fibre. For example, to business customers and metro sites where it makes commercial sense,” Dr Reynolds said half way through his May 24 presentation, his voice noticeably tightening.
On May 12, Chorus chief executive Mark Ratcliffe stood aside to focus full-time on Telecom's Crown Fibre bid.
All-comers submitting refined submissions
Communications minister Steven Joyce announced the "refined" RFP process on June 30. The key driver behind the unscheduled round of tendering was to give bidders the chance to add lit fibre provisions to their proposals. The original round of tendering focused on so-called dark fibre (cable without the necessary electronics to connect a home or business to the internet, or a pay TV provider or other service).
So far, only Telecom has made public (limited) details of its refined proposals.
Crown Fibre Holdings expects to begin negotiations with preferred bidders in October.
The Crown is looking for private partners to at least match its $1.35 billion, 10-year investment across up to 33 Local Fibre Companies.
