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Telecom starts charm offensive over structural separation

Wednesday 30th June 2010

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Telecom has launched a charm offensive as it seeks to garner investor support for a proposal to carve out of its profitable network business and tap the government’s $1.35 billion fund to roll-out high-speed internet.

Chairman Wayne Boyd, who earlier this week affirmed his commitment to the company until the phone company has completed a move to a new structure, told investors any major decision such as splitting the company would need their approval.

Telecom is only considering the option to participate in the government’s plan to roll-out an ultra-fast broadband network around the country, which its current structure excludes it from, Boyd said.

“Structural separation of some form is an option we are considering, but for us to proceed with a separation the benefits need to outweigh the costs,” Boyd wrote in a letter to investors.

“This potential change is extremely significant but it is only one of many changes that are currently underway.”

Earlier this year, chief executive Paul Reynolds flagged a potential de-merged Telecom as a possible route for the company to tap the government’s fund, but for any changes to go ahead, it needs lighter regulation of its high-speed copper services. The shares fell 1.6% to $1.86 in trading today, and have slumped 24% this year.

Boyd told shareholders the company is only at the start of understanding whether the benefits of structural separation will outweigh the costs, and said it will keep investors informed of its progress.

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