At an analyst briefing in Sydney this morning, Telecom chief executive Paul Reynolds raised the prospect of a “de-merger.”This would involve Telecom being split into two separate listed companies, Dr Reynolds said.Any such “de-merger&rdq
At an analyst briefing in Sydney this morning, Telecom chief executive Paul Reynolds raised the prospect of a “de-merger.”
This would involve Telecom being split into two separate listed companies, Dr Reynolds said.
Any such “de-merger” would require the approval of both shareholders and debt holders, the chief executive told the Australian audience.
The de-merger was just one of several scenarios floated by the Telecom boss.
He also canvassed the exact opposite scenario to a “de-merger”: an unreconstructed Telecom pulling out of the Crown fibre tender, then competing head-to-head with the eventual winner (or winners).
A third possibility was the full sale of Telecom's networking division Chorus, said Dr Reynolds.
In short, although a dramatic new idea was raised, investors are still left guessing.
Dr Reynolds also said that in any form of structural separation, shareholder benefits must outweigh the costs.
Potential benefits included the lightening of regulation on Telecom’s retail business (as originally suggested when the company first formally raised the prospect of structural separation on Monday).
Potential costs of separating Telecom’s wholesale and retail businesses included “loss of the remaining benefits of vertical integration,” “duplication of overhead” and potential tax costs, Dr Reynolds said.
Telecom shares (NZX: TEL) were up 1.05% to $1.92 in early afternoon trading.
