Joyce defends Chorus' Kiwi Share-busting

UPDATE May 3:  Associate Finance Minister Steven Joyce is defending the Crown's decision to waive the 10% Kiwi Share restriction for AMP Capital, allowing the Australian-controlled company to lift its stake in Telecom spin-off Chorus to up to 15%. 

“This request came about because of the merger between AMP and AXA, and the combined total of Chorus shares under the control of their various managed funds and investments," Mr Joyce told NBR ONLINE.

Why not require AMP Capital to sell-down its stake to stay below 10%?

"That would be an option," Mr Joyce responded.

"But it’s important to point out that the AMP shareholding is actually the aggregation of a whole lot of small investors who have invested through AMP and AXA. In that respect, the shareholding is not like that of a cornerstone investor."

Opposition parties say the AMP Capital exemption proves the government can't be trusted to stick to the rules with pending partial asset sales.

Mr Joyce implies the previous government was more guilty on Kiwi Share waivers.

He told NBR, “Previously the Crown has given approval to exceed former Kiwi Share ownership restrictions on Telecom to Franklin Resources (2002), ING Group (2006), and Commonwealth Bank of Australia (2007). It’s worth noting that all three of these occurred under the previous Labour Government."

The minister said the companies exemptions "Because these types of shareholders are generally considered as passive investors, and own shares on behalf of their individual clients.”

Chorus deal proves govt can't be trusted on asset sales - opposition

May 1: Opposition parties have waded into the government's decision to approve Australian-controlled AMP Capital taking a 15% stake in Chorus, breaking the 10% Kiwi Share cap.

"During the debate on the Telecommunications Amendment Bill last year, the then ICT Minister Steven Joyce dismissed out of hand suggestions that the removal of the Kiwishare obligation from Chorus would result in increased foreign ownership," Labour's ICT and broadcasting spokeswoman Clare Curran told NBR Online this afternoon.

"The question now is, how much more of Chorus will the government be prepared to sell? Chorus is charged with rolling out fast broadband to the New Zealand public using taxpayers' money What's for sale next?."

Green Party leader Russel Norman said the government's approval "proves it can't be trusted to limit foreign ownership in its planned asset sales programme."

Mr Norman said, "The 10% limit on ownership of Chorus by individual investors mirrors the limit in the Mixed Ownership Model Bill that the Government is passing to allow the sale of shares in Genesis, Meridian, Mighty River, Solid Energy, and Air New Zealand. Both limits are intended to curtail foreign ownership of strategic infrastructure.".

ICT Minister Amy Adams did not immediately respond to a request for comment.

The Telecommunications Amendment Act provided for the government's $1.35 billion Ultrafast Broadband (UFB) rollout, and the associated spin-off of network division Chorus from Telecom. 

A last-minute change to the legislation saw the legislation saw the Kiwi Share provision removed from the Telecom. With Chorus, the foreign ownership prohibition was retained - but as a deed or contract between the government and the company, rather than enshrined in law.

Kiwi Share skirted
Earlier today, Chorus told the NZX that the Australian-controlled AMP Capital Investors New Zealand, which manages about $12 billion locally, has been granted government approval to build its stake in telecommunications network operator Chorus above the 10% cap.

The fund manager got Crown sign-off to lift its existing stake in Chorus from just under 10% to as much as 15%, the telecommunications lines company said.

Investors have to get government approval to buy hold more than 10% of Chorus' stock under its constitution.

AMP Capital has bucked the trend among fund managers by backing the network company when it was demerged from Telecom, with most institutional investors choosing to build unfettered stakes in the retailer.

Chorus was carved out of Telecom as a standalone entity last year in a deal that would let the network company tap $929 million of taxpayer funds to build high-speed broadband lines across 75% of the country.

That lifted regulatory burdens on Telecom, which is now operates as a retail company.

As part of the deal, Telecom shed its cap on ownership, freeing it up for a takeover, though Chorus retained the so-called kiwi share obligations, limiting international investment in the company.

Chorus' shares [NZX:CNU] were up 1.17% to $3.47 in trading yesterday, and have climbed 17% since listing last year.

With reporting by BusinessDesk.