No shareholder vote needed on Telecom's $500 million 3G deal

Friday 17th August 2001

By Nick Stride

The Stock Exchange's market surveillance panel has ruled Telecom doesn't need to get shareholder approval for the company's half-billion dollar 3G mobile telephony investment.

Telecom asked for a ruling because it wasn't sure whether its deal would result in its 3G partner, Hutchison Australia, becoming a "related party" as defined by the exchange's listing rules.

If it had, a shareholder vote would have been necessary as the $500 million price tag is more than 5% of Telecom's shareholders' funds.

Under the deal, announced in May, Telecom and Hutchison will build 3G networks in Australia and New Zealand. Telecom will contribute $A250 million ($312 million) for a 19.9% stake in a new company, Hutchison 3G Australia, and has committed a further $A150 million ($188 million). The Australian network is expected to be operational at the end of 2002 or in early 2003.

Telecom will form Telecom 3G to build the New Zealand network. Hutchison has an option to pay $250 million for a 19.9% stake within two years of the launch.

Hutchison needs its own shareholders' approval for the deal because it will give Telecom a technical interest in the majority stake held by parent Hutchison Whampoa.

The timing of the New Zealand rollout is at Telecom's discretion. The announcement gave no indication of how much the local project would cost.

Telecom raised $500 million through a share placement to institutions at $5.50 a share two weeks after the 3G deal was announced.

The shares, trading at $5.92 before the placement announcement, fell immediately on the news and have since slid to $5.11.

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