Axe descends as Clear falls to Telstra Saturn

By Nick Stride

Friday 16th November 2001

ABOUT TO HAVE A HOLIDAY: Jack Matthews

Telstra Saturn will begin a wide-ranging review of its operations following yesterday's $435 million purchase of Clear Communications from British Telecom.

Telstra International vice-president Dick Simpson conceded there was overlap between Clear and Telstra Saturn's networks and operations but would not be drawn on details.

Telstra Saturn has about 1000 staff and Clear 800. Mr Simpson said there would be cuts but declined to comment on speculation that up to 800 jobs could go.

Networks were under review and the company was "looking at" plans to extend the broadband pay TV, data and telephony network from the Wellington area into Christchurch and Auckland.

But he said Telstra Saturn was "delighted" with its pay TV business, which had about 26,000 subscribers, and remained committed to it.

Telstra Saturn's veteran chief executive Jack Matthews will be replaced by Rosemary Howard, the Australian head of Telstra's wholesaling division, which last year had $3 billion of revenue.

Mr Matthews told The National Business Review he planned to take two or three months' holiday "for the first time in my life."

He would then look around for a job. He hoped to remain in New Zealand.

The $435 million price tag is made up of $143 million for Clear's equity, $270 million of shareholder loans from BT, which will be taken over and refinanced, and $22 million of external debt.

Mr Simpson said the price was $74 million less than Clear's net asset value at March 31, "so we think that's pretty keen pricing."

The acquisition will be funded with a bridging loan from Telstra Saturn's existing banks of up to $A290 million ($359 million) and equity and debt from Telstra.

Telstra will have about 62% of the combined entity and Saturn's parent Austar about 38%.

Austar's Bruce Marr said his company was committed to growing Telstra Saturn over the next three years.

After 2004 Telstra has the option of buying Austar out and Austar has the option of selling to Telstra.

Telstra Saturn would now enter a phase of "integration, consolidation, and growth," Mr Simpson said.

The aim was to form a single company as soon as possible - hopefully by the first half of December - with a 12-month target for full integration.

The New Zealand telecommunications market is presently worth $4 billion a year, of which Telstra Saturn and Clear have about 11%.

Mr Simpson said the market was forecast to grow at three times the estimated rate for the economy as a whole, to $5-6 billion by 2005.

The new company will have about 303,000 customers - 257,000 residential, 46,000 business and 250 corporate or government.

The deal is conditional on regulatory approvals from the Commerce Commission and the Overseas Investment Commission.

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