Telecom demerger formally on the table in new UFB bid

Monday 2nd August 2010 1 Comment

Telecom has officially put itself on the carving block in its latest bid to tap government funds to roll-out high speed internet through the nation.

The bid relies on the structural separation of Telecom into two units that would carve network business Chorus out as a standalone company. The de-merger proposal will need at least 75% of shareholders to give it the nod of approval.

“No sacred cows have been spared and no assumptions have been left unchecked as we have worked through this stage of what is a challenging but critically important issue,” said chief executive Paul Reynolds in a statement.

“We have also proposed integrating the Ultra-fast Broadband initiative with the Rural Broadband Initiative. Integrating the two initiatives would allow for the extension of the reach of Ultra-fast Broadband into rural areas well beyond the 75% coverage area.”

Reynolds hinted at a demerger on the company’s investor day in May, saying that was one way Telecom could participate in the government’s $1.35 billion plan without diluting shareholders’ value.

For that to go ahead, the phone company would need significant relief from the regulation of its high-speed copper services. The shares climbed 1.5% to $2.02 in trading today.

Businesswire.co.nz

Comments from our readers

On 3 August 2010 at 10:51 am Scott said:

I wonder how big Paul Reynold's exit package will be? A lucrative exit from Telecom and New Zealand that saves his face is sure to have been a big driver behind this.