Telecom: company split 'extremely challenging' without Auckland
Company sees potential shareholder headache as Vector is named a Crown Fibre priority bidder.
Structural separation would be "extremely challenging" if Telecom failed to win the Auckland Crown Fibre contract, external media manager Mark Watts told NBR this afternoon.
Mr Watts said it would come down to convincing owners to vote for a split, which would be a hard sell if Auckland was not in the bag.
This morning, Telecom's prospects of bagging our largest city dimmed a little as Vector was named a second priority bidder.
Last year, Telecom chief executive Paul Reynolds told NBR that Telecom's bid was a national one, and that it would be "bonkers" to try and spin off Chorus without the Auckland UFB contract.
Mr Watts said Telecom stood by previous comments.
For Telecom to participate in the Crown Fibre initiative - which prohibits companies with retail busines form holding a majority share in a Local Fibre Company - Telecom must split into two separately listed companies, each with its own board and management.
Yesterday, the govenment tabled legistlation that would allow for Telecom's structural separation in the even of it winning one or more Crown Fibre contracts.
However, such a split also requires debt holder and shareholder approval.
At this point, some UFB contenders may also be thinking back to another of Dr Reynolds statements from last year - namely, his veiled threat that Telecom could cherrypick the most commercial fibre business if excluded from the Crown Fibre project.
Telecom shares (NZX: TEL) were down 0.9% to $2.21 in early afternoon trading.
Vector (NZX: VCT) was trading up 1.6% to $2.54.
Alex Walls & Chris Keall
Thu, 17 Feb 2011
Thu, 17 Feb 2011
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Telecom: company split 'extremely challenging' without Auckland
12418