26 May 2011

Telecom shares surge after broadband contract

8:32 am on 26 May 2011

Shares in Telecom rose to a 16-month high on Wednesday, propelled by investors who see more certainty in the company's future after it was selected to build most of the country's ultra fast broadband network.

The company's shares finished the day up another 2% to $2.49 each, adding to the previous day's almost 7% gain.

The rise signals shareholder support for Telecom, which must split its network arm Chorus into a new listed company as part of the deal with government.

But ratings agency Moody's Investors Service says splitting Telecom into two separate firms may leave the phone company with reduced earnings, and it's considering downgrading Telecom's credit worthiness.

Forsyth Barr's telecommunications analyst, Guy Hallwright, says some of the uncertainty Telecom faced has been removed, but there's still a lot of detail missing about what Telecom and Chorus will become.