Vodafone talks to Telstra about buying TelstraClear

Paul Brislen.
Paul Brislen.
Telstra, Australia's biggest phone company, says it is in talks with Vodafone over the possible sale of its TelstraClear unit in New Zealand.

There was an expectation Vodafone would be seeking access to TelstraClear's extensive cable network.

Telstra "was approached by, and is in discussions with, Vodafone New Zealand to explore the potential sale of Telstra Corp's New Zealand subsidiary, TelstraClear, to Vodafone New Zealand", the company said in a short statement to the ASX. The comments were made in response to media speculation.

The talks were continuing and there was no certainty a deal would be reached, according to the statement from Telstra company secretary Damien Coleman.

Telecommunications Users Association of New Zealand chief executive Paul Brislen said that without a mobile division to call its own, TelstraClear was always going to struggle in New Zealand.

"Either Telstra needs to put up and invest, or it's time to call it a day. By the sounds of it, having looked at Vodafone NZ and not wanting to pay the asking price, it would seem a reverse offer is on the table."

Mr Brislen did not believe Telstra wanted Vodafone's spectrum, as it already had plenty and would be buying more through the 700MHz sale next year. He believed Vodafone was interested in Telstra's fibre.

When Telstra bought Clear Communications, it bought a "truly magnificent" national backhaul network running across Auckland, Wellington and Christchurch and connecting north with south.

"In the coming battle for UFB, demand for national backhaul will vie with international capacity as the big game in town.

"ISPs will need to open the taps up if they're to offer a service that delivers anything like what the customer is expecting and national backhaul with be critical in that."

If the deal did move to completion, it would have to survive Commerce Commission scrutiny, but Mr Brislen believed Telstra would not need to buy Telstra's retail customer base. It would just want the infrastructure.

"Ejecting the customers out into the world for any and all to snap up would go a long way towards assuaging any ComCom concerns, I believe."

There was a lot of risk for Vodafone, he said. The culture would have to be completely reinvented and the company as it was now would have to cease to exist and be reborn.

Telecom would have its hands full in the next 18 months with a new chief executive, a new operating environment and the new market structure as the country moved to ultrafast broadband, Mr Brislen said.

The news of the talks was broken by the Voyager internet service provider, which tweeted: "Hearing rumors @Vodafonenz has bought @TelstraClearNZ to get TCs stock of 4G spectrum & consolidate the market. Big telco shakeup if true!"

In February, TelstraClear reported a return to profit on a before-tax earnings basis, reflecting its cost-cutting programme. The Auckland-based company had earnings before interest and tax of $1 million in the six months ended December, turning from an ebit loss of $8 million a year earlier.

Operating expenses fell 7.2% to $270 million, helping lift earnings by 11% to $69 million.

New Zealand's Commerce Commission said in its annual report in April last year that TelstraClear had a 16% share of home internet connections, while Vodafone had 13% and Telecom had 49%.

Telecom shares fell nearly 5% yesterday after the announcement and Telstra shares rose 1.29%.


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