Telecom clears the decks for its Australian assault

Thursday 22nd March 2001

By Nick Stride

Telecom is examining options to move its network assets off the balance sheet as it gears up its assault on the Australian market.

The carrier is negotiating a deal with Australia's Hutchison Telecommunications that would see it fund Hutchison's rollout of third-generation mobile services as an alternative to bidding for C&W Optus' mobile division.

Market observers have cast doubt on Telecom's ability to fund a large-scale expansion of Australian mobile, given the amount of debt it took on to buy third-ranking telco AAPT. But Telecom has insisted it can raise the money.

If it decides to go ahead with network-ownership changes the move would free up considerable space on the balance sheet.

Group general manager network Simon Moutter confirmed yesterday Telecom was looking at "moving network assets into superior financing arrangements and, in future, off balance sheet."

The options ranged from cross-border leasing arrangements to total outsourcing.

"We'd want to reach a conclusion on whether there's an opportunity there within the next six months," Mr Moutter said.

"It has the potential to tie in with our looking to reduce the number of vendors we deal with and to find some strategic partners."

Cross-border leasing, which is increasingly popular with telcos, involves selling network assets to overseas investors and then leasing them back. It has advantages to the vendors provided the lease payments are less than the cost of the capital previously employed in owning the assets.

Vodafone Australia sold its mobile towers to Crown Castle for $A240 million in December. It said the sale would allow it to move away from managing real estate.

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