CBA report spooks Telecom investors

By Nick Stride

Friday 8th February 2002

Telecom's share price took a dive yesterday morning despite the company denying a major contract was in trouble.

The shares had fallen 17c by mid-morning yesterday in the first trading since the Australian newspaper on Wednesday reported "severe service problems" were "throwing a shadow" over the joint Telecom/EDS $A500 million contract with Commonwealth Bank of Australia.

Telecom has denied difficulties, saying a recently concluded review of the contract had identified no significant issues.

Telecommunications stocks have recently been falling around the world after a strong January rally. A share dealer said yesterday the newspaper report would have spooked already nervous investors.

The Australian quoted "Telecom insiders" as claiming competitors for the telecommunications contract for Insurance Australia Group, formerly NRMA, were stirring up rumours in an attempt to damage Telecom's chances of winning the tender.

The Australian said two severe nationwide outages in the last week had crashed CBA's internet platform and snagged its ATM network.

Telecom has been struggling to break even in Australia since the 1999 acquisition of subsidiary AAPT.

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