Sharechat Logo

Telecom Doesn't Favour Elliott Split Plan, Boyd Says

Tuesday 12th August 2008

Text too small?
Telecom, whose US shareholder Elliott International wants board changes and a new strategy, doesn't favour the private investment firm's suggestion to split up the company.

Two potential independent directors, Mark Tume and Mark Cross, will put themselves up for election at Telecom's Oct. 2 annual meeting, supported by Elliott. Tume is a director of Infratil Ltd. and Cross is a former Deutsche Bank executive.

"Telecom's performance languishes behind that of other key telecommunications players in the international market," said James Smith, a portfolio manager at the fund, in a statement. Telecom has an "unclear and outdated strategy" and shareholders remain dissatisfied with the company's progress, he said.

Elliott, which owns 3% of the stock, said Telecom should consider a structural split of retail and network, a step further along its current path of operational separation.

Telecom Chairman Wayne Boyd said separating the two units isn't in Telecom's best interests right now. He defended Telecom's track record, saying "we have the management team, strategy and financial expertise
to maximise long-term shareholder value."

Shares of Telecom have shed about 35% in the past five years while the benchmark NZX 50 Index, which the company dominates, has gained 45%. The stock fell 1.2% to NZ$3.36 today.

Telecom's annual earnings fell 16% from a year earlier, the company said last week. Its profit margin in New Zealand "continues to reduce" as customers migrate away from more profitable fixed-line services to mobile, where Telecom competes with Vodafone.

Tume and Cross would bring "strong commercial and strategic acumen" to the board, Elliott said.

Moody's Investors Service today affirmed Telecom's A2 and P-1 ratings while keeping the outlook at 'negative.'

By Jonathan Underhill



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Telecom Corporation of New Zealand (TEL)
Telecom in drive to latch on to growing data usage with 4G mobile launch next month
Telecom lines up to buy 700MHz spectrum to extend reach of 4G network
Telecom backs setting copper prices until 2020, warns against getting too far away from input cost
Telecom puts $60M price tag on new Auckland data centre, Hawkins, AECOM win build
Telecom ends jobs purge, looks for ‘more sophisticated’ ways to save money
Telecom FY earnings fall to bottom of guidance range, sees unchanged dividend in 2014
Telecom takes spat with Vodafone to regulator after dropping court action
Telecom unbundling key to regulator's copper conundrum
Telecom lures customers to faster services in EPL deal