Telecom shareholders vote for split: where to from here

UPDATE: Telecom shareholders have voted in favour of a split, ushering in the biggest change in the telecommunication industry in a generation. As anticipated, the margin was overwhelming (99.8%). 

Chairman Wayne Boyd said 1.3 billion proxy votes had been received, representing around 66% of Telecom shares. There was no quorum.

The company faces one remaining hurdle - High Court approval of its separation plan. A decision is expected by November 14.

Telecom shares [NZX:TEL] closed down 1.17% to $2.53. The company is off it's recent two-year high of $2.79, though still well ahead of its $1.95 nadir ahead of the government's Crown fibre decision. 

Where to from here
New Chorus” (Telecom’s network division, now including most of Telecom Wholesale) and the remaining company – dubbed “New Telecom” - will each have their own board, chief executive, and NZX listing. Mark Ratcliffe (currently CEO of Chorus as a Telecom business unit) will head the spun-off company.

• November 14: anticipated date for the required High Court to approve Telecom’s separation scheme.
• Investors of record as of November 18 (ASX) or November 22 (NZX) will receive one New Chorus share for every five Telecom shares they hold, with new statements issued November 30.
• Nov 23: New Chorus shares begin trading on the NZX with deferred settlement
• Nov 25: New Chorus shares begin regular NZX trading.
• Dec 1: New Chorus shares begin regular ASX trading

Telecom (or “New Telecom” as it’s called for differentiation purposes in documents about the demerger) will remain dual listed on the NZX and ASX as it is today (and on the Nasdaq as an ADR) throughout the process.

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UPDATE 10.30am: Telecom chairman Wayne Boyd has confirmed his resignation, as previously signalled. Mark Verbiest will become chairman upon separation (read Telecom proposes replacing long-time chair Boyd with Gattung-era counsel).

Mr Boyd also confirmed that a replacement for outgoing chief executive Paul Reynolds will be appointed before the end of the company's financial year (June 30, 2012).

Independent director Kevin Roberts addressed shareholders and seemed to be in good health.

The Saatchi & Saatchi boss was admitted to Auckland Hospital on Friday after taking a turn on stage at the Thrive conference.

Mr Roberts (along with Murray Horn) was re-elected).

Dr Reynolds told shareholders that if they vote for separation, Telecom will be the first telco in the world to split its wholesale and retail operations into two, separately listed companies.

The CEO's argument for separation boils down to: New Chorus' interests will be aligned with those of its Crown Fibre partner, the government. New Telecom (that is, Telecom today minus most of its network division, Chorus, and Telecom Wholesale) will be freed from the regulatory quagmire.

Dr Reynolds emphasised that the "retail" New Telecom would retain a lot of infrastructure, including national fibre backhaul, the XT mobile network, data centres and its 50% share in the Southern Cross Cable. (He could have added that New Telecom will also own the 20 largest urban phone exchanges. The balance - around 740 - will be controlled by New Chorus).

ABOVE: Despite falling off its recent 24-month high, Telecom (blue) has out-peformed the NZX 50 (red) in relative price gain for the year to date. (Source: Capital IQ. Click to zoom.)

6am: Telecom will reveal the result of the shareholder vote on its proposed split today.

Votes will be tallied at the company’s annual meeting, starting 10am at the Sky City Convention Centre (check in on NBR Online for updates).

Analysts expect the decision to go easily in favour of separation (a condition of the company’s $1.35 billion Crown Fibre contract with the government).

Unlike the earlier bondholder vote – which saw Telecom throw in a sweetener to get large institutions onside and motivate mum-and-dad investors to vote – there is no quorum.