Telecom split under way with stock exchange listings

The Telecom demerger and company split begins today on the Australian stock exchange and on the New Zealand exchange on Wednesday.

Late last week, it was reported United States investors had been selling out their Telecom shares and while there was revived interest from Asian investors, its share price during the week had declined 8.5% from $2.69 to $2.46 on Friday.

The complexity of the respective share valuations appeared to making some investors jittery.

In late October, Telecom shareholders voted overwhelmingly in favour of splitting the company into two separate listed businesses: its retail, mobile, IT and internet business to become New Telecom and its network-lines business becoming New Chorus.

The demerger allows New Chorus to participate in the Government's ultrafast broadband programme, having won $930 million from the Government to install fibreoptic cabling around the country, while New Telecom retains its mobile network, retail business, IT and internet services.

Existing shareholders will get one new Chorus share for every five existing Telecom shares.

Forsyth Barr broker Suzanne Kinnaird said there was no direct comparison to value the respective shares, as Telecom is the first international telco to go through full structural separation of its access network.

She expected New Telecom shares to trade at about $1.65 a share and New Chorus about $4.75, or in ranges of $1.40-$1.90 and $4.25-$5.50 respectively.

Forsyth Barr forecasts for earnings before interest, tax, depreciation and amortisation were in line with those of independent adviser Samual Grant, with New Chorus at $650 million and New Telecom at $1.15 billion.

Ms Kinnaird said New Telecom was likely to have a declining revenue profile and face increasing competition, with future cost savings critical to maintaining or growing profitability.

She said New Chorus should become a stable regulated monopoly, and while it had a substantial capital expenditure programme and no guarantee of customer take-up, some of the government funding for the unused portion of the ultrafast broadband meant it mitigated some of the customer take-up risk.

• In a multi-company swoop in earlier this month, the world's largest asset management company, United States-based Black Rock, grabbed a 5%, $250 million stake in Telecom when 16 of its global subsidiary companies purchased shares.

Black Rock became the third- or fourth-largest shareholder in Telecom, prompting talk in the market of a takeover ploy for New Zealand's then largest listed company.

In a shareholders' notice released by Telecom, it listed 16 Black Rock companies around the world, including those from Canada, Australia, Japan, the United Kingdom, Germany and the Netherlands, which purchased a stake totalling 5% in all.

- simon.hartley@odt.co.nz