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Telecom US shareholder seeks new directors

By Jane Shanahan

Monday 11th August 2008

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Elliott International, a US private investment firm which owns 3% of Telecom, nominated two directors to overhaul strategy and potentially break up the company.

“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 Telecom has an “unclear and outdated strategy” and shareholders remain dissatisfied with the company’s progress, he said.

The US firm said Telecom should consider a structural split of its business units, a step further along its current path of operational separation. Elliott first made the proposal last year in a submission to the government on its plans to lift competition and service quality in telecommunications.

The candidates, Infratil director Mark Tume and Mark Cross, a former senior executive at Deutsche Bank, would bring “strong commercial and strategic acumen” to the board, Elliott said. The pair will stand for election at the company’s annual meeting on October 2.

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 was unchanged today at NZ$3.40.

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.

(BusinessWire.co.nz)

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