Telecom demerger vote expected this afternoon

Wednesday 26th October 2011

Telecom shareholders have started voting on whether to carve the company in two, letting it shed regulatory burdens and hitching its network business to a billion dollar subsidy to build a national broadband network.

The results are expected this afternoon and the media and stock exchange will be notified later today, chairman Wayne Boyd told shareholders at their annual meeting in Auckland. About 1.3 billion votes, or 66 percent, have been received, and the proposal needs 75 percent to get over the line. Bond holders have already approved the deal.

“A massive year of change for Telecom culminates today,” chief executive Paul Reynolds told shareholders. “We’re more in charge of our own destiny than we have been for some time.”

Telecom put forward the demerger proposal as a means to tap the government’s $1.35 billion subsidy to roll out a nationwide broadband network, and its Chorus unit was successful in winning about 70 percent of the contract.

If shareholders approve the split, Telecom’s Chorus network unit will become a standalone listed entity, at a benefit of some $500 million to shareholders based on the Crown subsidy, according to independent adviser Grant Samuel’s report.

Reynolds said both companies will be well-placed in the new environment, with Chorus holding a near-monopoly of fixed line services, and new Telecom having strong market share in the retail space, as well as owning infrastructure such as the stake in the Southern Cross cable and the national backhaul network.

New Zealand Shareholders’ Association chairman John Hawkins thanked Boyd for his contribution to Telecom’s board, saying there had been a “sea-change in the attitude and focus of Telecom for the better.”

Hawkins said he hoped the remuneration of executives and directors in the two new entities will be more closely aligned with the interests of shareholders and the performance of the companies.

Shares in Telecom fell 0.4 percent to $2.55 in trading today, and have climbed almost 18 percent this year.

Directors Murray Horn and Kevin Roberts put themselves up for re-election as part of Telecom’s ordinary business.

BusinessDesk.co.nz

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